Saudi Arabia has emerged as one of the ideal destinations for business and entrepreneurship from across the globe. Thanks to the active government measures and many associated benefits such as the lowest average tariff rate in the Middle East, simplified procedures for company formation in Saudi Arabia, liberal political environment, 100% foreign ownership, lower tax rate and numerous other incentives.
In order to ease the procedures for foreign companies aiming for doing business in Saudi Arabia, the government has established the Saudi Arabian General Investment Authority (SAGIA) which helps foreign companies in getting approvals for operation, obtain a license, get labour visas and conduct other business affairs.
The government continues to pursue economic reforms, promote foreign investment and diversification which makes it an attractive destination for foreign companies aiming for doing business in Saudi Arabia.
Moreover, Saudi Arabia has been crowned as the Middle East and North Africa (MENA) region’s best country to do business by the World Bank. Talking about the business opportunity in Saudi Arabia, the real estate, hospitality and construction are the key industries that offer enormous opportunities to investors.
Let us look at the basic requirements for doing business in Saudi Arabia and the company registration process in Saudi Arabia.
Basic Requirements for Registering a Company in Saudi Arabia
- Investment Share Capital – A minimum of Saudi Arabian Riyal (SAR) 5,00,000 is required to register a new company
- Number of Shareholders – As per the law of the country, a company can have at least 2 to a maximum of 50 shareholders.
- Auditor – Every private limited company in Saudi Arabia shall appoint an auditor.
- Application for Company Incorporation – The company incorporation application has to be submitted with the SAGIA along with all the supporting documents.
- Hiring Labour – If a foreign company is willing to hire local employees, it has to first get permission from the Ministry of Labour by submitting the required supporting papers.
- Zakat and Income Tax – Every private limited company in Saudi Arabia has to obtain Zakat and income tax certificate or license from the Ministry of Finance.
Taxation for companies in Saudi Arabia
- Tax Incentives – If a foreign company is registered in certain economic cities located in the under-developed provinces of KSA, it enjoys various tax incentives.
- Tax Free – There is no tax levy on the sales and hiring foreign employees, provided certain conditions are fulfilled.
- Corporate Income Tax – Corporate income tax is levied at the rate of 20% to 45%. However, the rate varies from service to service and product to product.
Process of Company Incorporation in Saudi Arabia
In order to establish an entity in Saudi Arabia, foreign investors are required to follow the below steps:
1. Reserve company name through the website of the Ministry of Commerce and Industry.
2. Submit Articles of Association to the Ministry of Commerce and Industry and get it stamped by them.
3. Get the Articles of Association notarized by the Notary Public.
4. Open a bank account with a local bank in KSA for depositing the initial capital.
5. Obtain the investment license from the SAGIA.
6. Obtain Certificate of Registration.
7. Register with the numerous governmental authorities such as:
- Ministry of Commerce and Industry for obtaining commercial registration
- Chamber of Commerce
- Ministry of Labour
- Customs Department
- The General Organization for Social Insurance
- The Department of Zakat and Income Tax
Types of Business Structures in Saudi Arabia
For doing business in Saudi Arabia, a foreign company is allowed to operate through the following structures:
Limited Liability Companies (LLC)
It comprises of minimum 2 and a maximum of 50 partners (shareholders). They are liable only to the extent of the share capital they have invested in the company. The capital investment in LLC should be minimum SAR 5,00,000.
Foreign Office Branch
Foreign companies can set up a branch office after getting approval from the Minister of Commerce and Agriculture. The branch office is subject to the Foreign Investment Law and the regulatory authority of the Ministry of Commerce and Industry. To know more about how to open a branch office in Saudi Arabia, you may get in touch with IMC Group.
Foreign companies have to appoint a local Saudi Commercial agent to sell their products/services in KSA. Agency arrangements are controlled by the Ministry of Commerce and Industry.
Joint Stock Companies
It comprises of minimum 5 shareholders who are liable only to the extent of the share capital they have invested in the company. The minimum capital requirement is SAR 2 million for a private company or SAR 10 million for a public company.
Technical and Scientific Offices (Representative Offices)
A foreign company can open a technical and scientific office to provide technical and scientific support to the parent company in terms of conducting market surveys, undertake product research, etc. They can operate only after obtaining a license from the Ministry of Commerce and Industry.
For further information, you may get in touch with IMC Group.