Starting a business is a huge commitment that entails frequent dealings with typical yet potentially complex issues like financing, laws, liability protection, human resources, intellectual property, and taxation to name a few. A business is not only about selling products to customers, but it also concerns setting up a proper organizational framework to make sure your company stays legally compliant wherever it is. In Saudi Arabia, for example, there are some basic procedures to follow when establishing a new company. To know more about how to start a business in Saudi Arabia for foreigners, here are the fundamentals to understand.
- How to Start Business in Saudi Arabia for Foreigners
- Steps and Procedures on How to Start a Business
- Some Considerations on How to Start a Business
- Why Choose GCC Solutions?
At the moment, Saudi Arabia is the only Arab country to be in the G20. While it is true that the country has one of the world’s largest economies, it mostly depends on oil industry. Other sectors must be taken in account to sustain growth, and therefore the Kingdom of Saudi Arabia (KSA) has made some changes to business regulations to encourage and promote foreign investments.
The government had already established the Saudi Arabian General Investment Authority in 2000, or about eight years before it first participated in a G20 summit in Washington. Now in the midst of a heightened concern for climate change and the ever increasing pressure on the oil industry to slow down, the need to diversify the economy brings a refreshed sense of urgency.
Saudi Arabia maintains some sectors in which foreign investments remain prohibited, but over time government policies loosen the restrictions. It has now opened the doors of opportunities for all foreigners to launch their businesses in the country in various sectors such as insurance, telecommunication, construction, and retails among others.
About 80% of the working class – those employed in the private sectors – are foreigners. There has been an attempt by the KSA to replace foreign workers with Saudi nationals in the past with limited success, leading to a shift in focus in fulfilling the goal of diversification. Instead of trying to “localize” the private sectors, the government welcomes everyone from another country to set up a company here.
If you are a foreigner wondering how to start your own business in Saudi Arabia, rest assured that there are no more complex bureaucratic hurdles in the process. The regulations are still fairly complex, but for the most part things have become much easier than a few years ago. A massive part of the change is that entrepreneurs from outside the country are allowed to maintain 100% ownership of their businesses. Regardless of your citizenship, you are the sole owner of all assets you pour into the business. It may sound simple enough, but the policy will also affect liability and taxation to a substantial extent.
The ease of restriction does not necessarily mean instant approval from the local government. Every foreigner still has a long list of procedures to follow and requirements to meet before the business is ready to launch and regarded as legal-compliant. Much like how to start up a business anywhere, compliance with local regulations is key to acquire insurance, obtain more investments from local entities or otherwise, and establish partnerships with local companies. In the unfortunate event where the business undergoes financial difficulties, you will be able to file for bankruptcy. In short, compliance determines the legitimacy of the business.
You may find the concept of setting up a legal framework for registering a company in your own country a bit confusing, let alone in a foreign one. GCC Solutions can provide assistance with everything a foreigner needs to set up a business in Saudi Arabia from registration to legal structuring, from licensing to liaison services.
GCC Solutions’ turnkey services cover the following procedures:
- Preparation of all documents relevant to the process of setting up a new business or incorporating a company owned by a foreigner.
- Submission of all required documents to relevant ministries and authorities including but not limited to:
- Ministry of Commerce
- Ministry of Investment (MISA), formerly Saudi Arabian General Investment Authority (SAGIA)
- General Authority of ZAKAT and TAX
- Ministry of Labor and Social Development
- Ministry of Justice
- Chamber of Commerce
- Visa and immigration process handling for foreign individuals or entities acting as Partners, Investors, or General Managers of the company to be registered.
- Visa and immigration process handling for foreign individuals who work as employees of the company to be registered.
- Documentation of the company’s legal framework and entity.
The process from registration to approval typically takes anywhere between 9 – 12 months assuming all documents submitted are all correct prior to submission.
According to the Ministry of Investment Services Manual, investment is open in all fields except in the following sectors:
- Oil exploration, drilling, and production
- Goods and services catering to military sectors
- Private security and investigative services
- Real estate investment in Makah and Medina
- Guidance services and tourist orientation related to Hajj
- Recruitment services
- Hunting and fishing of marine resources
The Ministry of Investment has published an investment manual in 2020 to clarify the procedures and requirements concerning the issuance of all relevant government licenses for foreign business entities. The manual is comprehensive enough and it goes into the specifics on how to start a business for foreigners, which Saudi ministries that handle the registrations, and where to file the applications. The Ministry of Investment has also stated that upon issuance, activities of business entities are subject to regulations and restrictions. Each business sector has its own set of provisions. Plan for issuance of license is given as follows:
Stage 1 – Issuance of Investment License
Requirements: The company’s commercial registration certified by the Saudi EmbassyLast year financial statements for certifications by the Saudi Embassy
Responsible Provider: MISAApplication Mechanism: MISA’s E-services portal
Stage 2 – Documentation of Memorandum Association
Requirements: Branches of foreign companies submit an official document stating the inclination to open a branch in the Kingdom of Saudi Arabia to complete the issuance of Commercial Register
Responsible Provider: Ministry of Justice and Ministry of Commerce Application Mechanism: Ministry of Commerce
Stage 3 – Issuance of Commercial Registration
Requirements: Commercial registration of parent company. Decision of the Board of Directors to open a branch (only for branches of foreign companies)Memorandum of Association (for new companies)Documentation of appointment of the general director. Proof of owners and the general director’s ID
Responsible Provider: Ministry of Commerce Application Mechanism: Ministry of Commerce
Stage 4 – Open Files
Requirements: Obtaining a file of the General Authority of Zakat and Tax (GAZT)Obtaining a file of the Ministry of Labor and Social Development Obtaining a file of the General Organization for Social Insurance (GOSI)
Responsible Provider: Ministry of Human Resources and Social Development, GAZT, and GOSIApplication Mechanism: MERAS E-services Portal
Stage 5 – Issuance of General Directors VISA
Requirements: Documentation of the appointment of the general directorProof of the general director’s ID
Responsible Provider: MISAApplication Mechanism: E-services Portals on MISA and MERAS
As it stands today, the Ministry of Investment, or the Kingdom of Saudi Arabia in general, will only facilitate the entry of foreign enterprises and provide the opportunity to establish companies in Saudi Arabia given the businesses are founded as the following legal entities:
- Limited Liability Company (LLC)
- Limited Liability One-person Company
- Joint Stock Company
- Foreign Company Branch
- Solidarity professional company
The most common form of legal entity used by foreign companies in Saudi Arabia is LLC. A major advantage of LLC is the possibility to engage in full range of business activities and that shareholders are only liable for the debts incurred by the business to the amount they have invested to the company.
In many respect, the corporate laws in Saudi Arabia are similar to those in western countries. For example, a business owner can run the company as a private entity or other forms. Although you are essentially granted the freedom to choose how to start a business, you do not want to be reckless when setting up the legal framework for it. Seek legal advice and guidance from professionals to help you go through the regulatory challenges.
Company registration process in Saudi Arabia has become easier over the years, but there are still some potential hurdles along the way due to cultural difference and language barrier. To avoid difficulties, here are some major considerations to take into account:
- You will figure out how to start a business if you have good knowledge of the region. It is a rule of thumb that applies not only to Saudi Arabia, but anywhere else in the world. Make the effort to conduct an extensive research about the business sector in which your company operates. A viable business plan must include good understanding of target market, government regulations, and competitors as well. Running a new business in a foreign land is not the easiest thing to do, but a credible marketing plan might attract locals and government support, too.
- Early business partnership with locals. In the past, Saudi government required a foreign business to have at least one local partner who held the majority of interest in the company. Fortunately the rule no longer applies today, meaning a foreigner is allowed to be the sole owner of the business, but it doesn’t negate the advantage of having a local partner anyway. A local partner – with an in-depth knowledge of local business landscape – can be an invaluable asset to the company.
- Proof of financial capabilities. As soon as a business becomes legally registered with the Ministry of Commerce, the owner must show proof of the company’s financial capability in the form of a saving in a bank. The amount varies from state to state, but it is anywhere between $10,000 and $50,000. Your money is a form of guarantee against liabilities, and the good thing is that you can withdraw the money shortly afterwards.
The process is rather complex, and there are always some financial risks involved. If you have to hire someone to help with the undertaking, make sure the person is a professional familiar with the registration process and good track record.
GCC Solutions cater to both local and international organizations of all business sectors in need of help to incorporate their business activities in Saudi Arabia. All our services are available on a personalized basis because we understand that every company of any business sector is unique in its own way and therefore each client requires specific approach. The very first step to deliver a satisfactory service is to know and understand the nature of the client’s business and then work to identify the most effective and ideal solutions accordingly. GCC Solutions specializes in tailor-made solutions by utilizing our in-depth knowledge of the regulatory environment and the corporate-structuring landscape in Saudi Arabia.
Localization is another crucial element in GCC Solutions’ success formula. During the registration and licensing process, we communicate with the authorities on behalf of your company in local language and behave in the mannerism they understand and prefer, all without sacrificing professionalism.
How to start an online business?
The first thing to think through when starting an online business is to understand the commitment and challenges involved in the venture. Whether you run the operation in Saudi Arabia or your home country, make sure you protect your personal assets by setting up a sound legal framework for it. The next things to do include obtaining a Tax ID in accordance with local regulations and opening a legitimate bank account for the company. Once the legal affair has been taken care of, business activities resume as usual like building a websites and launching a marketing campaign.
How much money is needed to start a business?
If it takes between $3,000 and $5,000 to start a small business in your home country, you need to pay for the additional cost for registering the company in Saudi Arabia, too. Not every process in the registration procedure costs money, however. Here is an estimate:
- Submitting an application to MISA and obtaining the license costs 2000 SR
- Publication of company name and summary of Articles of Association in the official gazette costs around 5500 SR
- Registration with the Ministry of Commerce and Chamber of Commerce costs 8100 SR
The total cost just to legitimize the company is 15,600 SR (around US$ 4,160). Opening a bank account and depositing money does not count as an expense because the money is still yours. Bear in mind, the number is only a rough estimate. Hiring a firm to help with the registration will cost additional amount, but it can save you a lot of headache.
How to start your own business?
The basic process to start a business is essentially the same whether offline or online, and it depends on the nature of the business itself. The only major difference is that with an online business, you don’t actually need a brick-and-mortar shop to conduct the buying and selling activities. In Saudi Arabia, even if you run an online business, the government still requires you have a physical address.
To know more about how to start a business in Saudi Arabia, feel free to contact GCC Solutions at the following addresses:
|Suite # 806, The Regal Tower – Business Bay, Burj DistrictPO Box 191284 – Dubai, UAE
|+971 4 557 9404
|Riyadh, Saudi Arabia
|Raseel Building, Suite 5, 1st Floor, Al Olaya, Riyadh, 11635, Saudi Arabia
|Office 6, 3rd Floor, Building 23, Gate 2B Dasman Complex, Jaber AlMubarak St. Block 4 Sharq, Kuwait City
|+965 50 175 783