Saudi Arabia’s bustling economy, valued at $1.7 trillion in 2022, offers aspiring entrepreneurs and investors a multitude of opportunities for starting a new business or expanding an existing venture.
Through careful research and planning, you can establish a business in Saudi Arabia and tap into the vast potential this huge market offers.
For those keen to leverage the kingdom’s vibrant business environment, the following Saudi business setup guide should get you on the right track.
Why start a business in Saudi?
- Strong economy and growth potential. Saudi Arabia was the fastest-growing economy among the G20 countries in 2022 and is expected to maintain its growth momentum in 2023. As such, it provides a wealth of opportunities for setting up a business.
- Strategic location and global connectivity. At the crossroads of Asia, Europe, and Africa, Saudi Arabia’s strategic location is perfect for businesses looking to tap into a global market. In addition, it has well-developed infrastructure and transportation networks.
- Skilled workforce and talent pool. Saudi Arabia has a young and increasingly educated population. Approximately two-thirds of the population is under 35, with a high literacy rate.
- Expanding consumer market. Saudi has a growing consumer market of nearly 36 million with a rising middle class. Because of this, more and more businesses are opening to cater to this growing market.
Read: Saudi Arabia a natural “incubator” for startups
Saudi business setup types
Limited Liability Company
Limited Liability Companies (LLCs) are a common choice for foreign investors looking to set up a business in Saudi. These companies require a minimum of two shareholders, with each shareholder’s liability limited to their share capital.
In addition, LLCs offer a flexible structure, making them suitable for small to medium-sized businesses. To set up an LLC in Saudi Arabia, follow these steps:
- Prepare the incorporation documents, including a detailed business plan.
- Apply for a foreign capital investment license (available for non-Saudi and non-Gulf Cooperation Council investors).
- Obtain the Certificate of Registration.
- Open a company bank account and deposit the required share capital.
- Register for taxation and with the local municipality.
- Apply for any necessary business licenses or permits.
Joint Stock Company
By comparison, Joint Stock Companies (JSCs) are suitable for larger enterprises, as they require a minimum of two shareholders and allow for shares to be offered to the public. Shareholders’ liability is limited to their shareholding, providing a level of protection for investors.
JSCs are often used by businesses seeking to raise capital through public offerings or those operating in highly regulated industries. Below are the steps to establish a joint stock company in Saudi Arabia:
- Submit the incorporation application to the Ministry of Commerce, including all required documents.
- Arrange for shareholders to subscribe to the company’s shares.
- Obtain a license to establish a JSC from the Ministry of Commerce.
- Prepare a report on in-kind shares for partners.
Foreign company branch
A branch of a foreign company allows a non-Saudi company to establish its presence in the country without forming a new legal entity. This option has, as a result, often been chosen by businesses that wish to test the market or engage in specific projects.
Here are the steps to establish a branch of a foreign company in Saudi Arabia:
- Appoint a service agent.
- Identify the industry and business operations.
- Apply for an investment license.
- Request a commercial registration certificate.
Business setup structure
Size and capital requirements
LLCs suit small to medium businesses, while JSCs favor larger enterprises. In terms of capital requirements, JSCs allow public share offerings, making them suitable for raising capital. On the other hand, LLCs have simpler capital requirements, whereas foreign branches depend on parent companies for capital.
Management and taxation
In general, LLCs offer more flexibility in management structure, while JSCs have a more formalized business setup. On the other hand, a branch of a foreign company follows the management structure of its parent company.
While JSCs may face strict tax requirements, LLCs enjoy tax flexibility. Foreign branches, meanwhile, follow local tax rules that could likewise impact taxes in the parent company’s jurisdiction.
Regulatory rules
JSCs face more complex regulatory requirements. Similarly, branches of foreign companies may be required to obtain licenses in addition to permits of various types from local authorities. LLCs, in comparison, have a simpler setup process.
Frequently Asked Questions
Q: Can a foreigner establish a business in Saudi Arabia?
Yes, foreigners can start a business in the country with 100% ownership.
The Saudi Arabian General Investment Authority (SAGIA), now known as the Ministry of Investment of Saudi Arabia (MISA), grants business licenses to foreign investors.
Q: How long does it take to register a company in Saudi Arabia?
The company registration process in Saudi Arabia typically takes 2-4 weeks, depending on the business structure and the completeness of the required documentation.
Moreover, additional time may be needed for obtaining licenses and permits specific to certain industries.
Q: What are the corporate tax rates for companies operating in Saudi Arabia?
The corporate tax rate for companies operating in Saudi Arabia is 20% on net taxable income. However, tax rates may vary for certain industries, such as oil and gas.
Additionally, there may be tax incentives and exemptions available for specific sectors or regions, such as those within the economic cities.
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