ByWith the economic reforms introduced by the Saudi Vision 2030 initiative, Saudi Arabia has become an increasingly attractive destination for foreign investors looking to set up a business in the Kingdom. There are numerous opportunities for energy and construction companies, IT, retail chains, etc. This blog will outline the steps, requirements, and processes of establishing a business in the KSA.
Step 1: Choose the Right Business Structure
Before diving into forms, determine what legal structure your business will take. This will influence how you operate, the taxes you will pay, and other legal responsibilities. Saudi Arabia has four most common business structures:
- Limited Liability Company (LLC): An LLC structure is in high demand among foreign investors in Saudi Arabia. An LLC has a minimum of one shareholder, but the owners’ assets are protected.
- Joint Stock Company (JSC): This is a good fit for large companies that have more than one shareholder and companies looking to raise capital from the public.
- Branch office: A foreign company can establish a branch office in Saudi Arabia to conduct operations.
- Representative office: Suitable for firms that plan to have a non-commercial representative presence to get information about the Saudi market.
Selecting an appropriate business form is a prerequisite step. It defines your scope, growth potential, and how your business will operate in the Kingdom.
Step 2: Obtain a Foreign Investment License from the Ministry of Investment of Saudi Arabia (MISA)
The step requires receiving an international investor license from the Ministry of Investment of Saudi Arabia (MISA), which is the government body governing and promoting investments in the Kingdom. The following documents are necessary for the application:
- MISA application form duly filled with all details required
- Attested copy of the Articles of Association (AoA) of your company
- Proof of financial solvency and business experience
- Passport photocopies of your company shareholders
After the MISA application has been reviewed and approved, your business will be granted an investment license, allowing you to operate the business legally in the Kingdom.
Step 3: Business Registration with the Ministry of Commerce
After obtaining the investment license, the next step is to officially register the business with the Ministry of Commerce. This includes:
- Select a company name: Choose a company name as followed by the rules and regulations of Saudi Arabia.
- Prepare and register the Article of Association: This official document details the internal rules of your business, its purpose, the management structure, and the profit division among shareholders. Then, register it either at the Ministry of Justice or by a licensed notary.
- Registration with the Chamber of Commerce: Membership by Saudi Arabian companies in the local Chamber of Commerce is compulsory. This body offers various platforms for networking, advocacy, and other services to businesses. After registration, the Commercial Registration (CR) will be issued that permits you to operate in the country legally.
Step 4: Account Opening in a Bank
Opening a corporate bank account in Saudi Arabia is one of the important post-incorporation requirements. Typically, the documents required to open a corporate bank account in Saudi Arabia include:
- Commercial Registration (CR)
- A MISA license for foreign investors
- Passport copy of company shareholders
- Articles of Association (AOA)
As for the Saudi Arabian banks, they typically have a lot of services that cater to businesses, such as currency exchange, international transfers, and Islamic financing. Therefore, the best course of action would be to gather information and study which bank service best suits the needs of the business.
Step 5: Obtain Relevant Licenses and Permits
Depending on your specific business and activities, you may need additional licenses or permits from other government agencies. This varies by industry. For example:
- Construction: Permits from the Ministry of Municipal and Rural Affairs.
- Retail and Trading: Licenses from the Ministry of Commerce.
- Healthcare and Pharmaceuticals: Approval from the Saudi Food and Drug Authority.
Step 6: Hire Employees and Register for Social Insurance
According to Linkhouse, Once your business is up and running, you can begin hiring the required staff. It is crucial to consider the rules regarding labour in Saudi Arabia, so familiarise yourself with the local hires and expat hire rules.
Step 7: Registration for VAT and Other Taxes
Saudi Arabia introduced Value Added Tax (VAT) with a general rate of 15% in 2018. Businesses with revenues over SAR 375,000 in any calendar year must register with the Zakat, Tax, and Customs Authority (ZATCA).
Step 8: Compliance with Local Laws and Regulations
Trading in Saudi Arabia requires constant compliance with local laws and regulations. This comprises of:
- Commercial Registration (CR) yearly renewal
- Timely presentation of financial statements and tax returns
- Adherence to labour laws concerning the benefits and conditions of employment for workers and other regulatory laws
Conclusion
Starting a business in Saudi Arabia might seem daunting, but the Kingdom has simplified the process. By following our guide and seeking expert assistance from Gatestone Group, you can successfully establish your business and capitalise on the thriving Saudi Arabian market.
