Business Setup In Saudi Arabia (KSA)

The cost of setting up a business in Saudi Arabia can vary significantly depending on several factors, such as the type of business structure, industry, location, and specific requirements. In 2024, the costs are expected to be influenced by the Kingdom’s ongoing efforts to streamline processes and attract foreign investment.

Company Registration and Licensing Fees:

• The fees for registering a limited liability company (LLC) with the Ministry of Commerce and Investment are expected to range from SAR 10,000 to SAR 20,000 (approximately USD 2,700 to USD 5,300) in 2024.
• Additional licensing fees may apply depending on the nature of the business and the industry sector, ranging from SAR 5,000 to SAR 30,000 (USD 1,300 to USD 8,000).

Rental or Property Costs:

• Office or commercial space rental costs can vary widely depending on the location and size of the premises, ranging from SAR 150 to SAR 500 (USD 40 to USD 133) per square meter per year in major cities like Riyadh and Jeddah.

Capital Requirements:

• The minimum capital requirement for a single-shareholder LLC will remain at SAR 300,000 (USD 80,000) in 2024.
• The minimum capital requirement for multi-shareholder LLCs will likely remain at SAR 500,000 (USD 133,000).
• Certain industries or sectors may have higher capital requirements set by the Saudi Arabian General Investment Authority (SAGIA).

Professional Fees:

• Legal and consultancy fees for company formation, licensing, and regulatory compliance can range from SAR 20,000 to SAR 50,000 (USD 5,300 to USD 13,300), depending on the complexity of the business setup.
• Accounting and auditing services may cost an additional SAR 10,000 to SAR 30,000 (USD 2,700 to USD 8,000) per year.

Visa and Immigration Fees:

• Work visa and residency permit fees for foreign employees are expected to be around SAR 5,000 to SAR 10,000 (USD 1,300 to USD 2,700) per employee in 2024.
• It’s important to note that the Saudi government continues to offer various incentives and support programs, such as reduced fees, tax exemptions, or subsidies, for businesses operating in specific sectors or locations. These incentives can significantly impact the overall cost of business setup and operations.

The corporate tax rate in Saudi Arabia is as follows:

1. The corporate tax rate is 20% for companies owned by Saudi nationals or citizens of other Gulf Cooperation Council (GCC) countries.
2. For companies owned by non-GCC nationals, the corporate tax rate is 20% on the share of non-Saudi or non-GCC partners and exempt for the share of Saudi or GCC partners.
3. For companies engaged in natural gas investment activities, the corporate tax rate is 30%.
4. For companies engaged in oil and other hydrocarbon production activities, the corporate tax rate is 85%.

It’s important to note that Saudi Arabia has signed double taxation avoidance agreements with several countries, which may impact the effective tax rate for foreign companies operating in the Kingdom.
Additionally, various tax incentives and exemptions are available for businesses operating in specific sectors or locations, such as economic cities or industrial zones. These incentives may include tax holidays, reduced rates, or exemptions from certain taxes for a specified period.

1. Ministry of Commerce and Investment (MCI): This ministry registers and licenses companies and oversees various aspects of commercial activities in the Kingdom.
2. Ministry of Human Resources and Social Development (MHRSD): This ministry handles matters related to labor laws, work permits, and visa requirements for foreign employees.
3. Ministry of Municipal and Rural Affairs and Housing: This ministry issues permits and approvals for various construction and development projects and regulates real estate activities.
4. Saudi Arabian General Investment Authority (SAGIA): This government authority is responsible for promoting and facilitating foreign investment in Saudi Arabia and providing support and incentives to foreign investors.

It is possible to combine different business activities in Saudi Arabia, subject to certain conditions and regulations. The Ministry of Commerce and Investment (MCI) allows companies to engage in multiple activities if they are compatible and fall within the company’s approved objectives.

However, depending on the nature of the business, certain activities may require specific licenses, permits, or approvals from relevant authorities. For example, healthcare, finance, or energy-related activities may have additional regulatory requirements.

When setting up a company in Saudi Arabia, it is essential to clearly define the intended business activities in the company’s Articles of Association or commercial registration. Any subsequent changes or additions to the business activities will require amendments to the commercial registration and necessary approvals from the MCI.

It’s recommended to consult with legal or business setup professionals to ensure compliance with all regulations and to determine the feasibility of combining specific business activities within a single entity.

Foreign investors in Saudi Arabia have several options for business structures, each with advantages and limitations. The most common structures available for foreigners include:

1. Limited Liability Company (LLC):

• Offers limited liability protection for shareholders
• A minimum of two shareholders is required
• Foreign ownership can range from 0% to 100%, depending on the sector

1. Branch Office:

• An extension of a parent company based outside Saudi Arabia
• No separate legal entity, but treated as a permanent establishment
• Requires a local Saudi service agent or sponsor
• Professional Company:
• Suitable for professional services like consulting, engineering, or legal services
• Foreign ownership can range from 0% to 100%, depending on the sector

1. Joint-Stock Company:

• Suitable for larger businesses with multiple shareholders
• Minimum capital requirement of SAR 5 million
• Foreign ownership can range from 0% to 100%, depending on the sector

1. Joint Venture:

• Formed through a partnership between a foreign entity and a local Saudi partner
• Ownership and control are shared based on the agreement

It’s important to note that certain sectors or industries may have specific regulations or restrictions regarding foreign ownership or business structures. The choice of structure will also depend on factors such as planned business activities, capital requirements, and long-term growth objectives.

The most preferred entity options for businesses in Saudi Arabia are:

1. Limited Liability Company (LLC):

• This structure is popular among local and foreign investors due to its flexibility and limited liability protection.
• LLCs can be wholly foreign-owned or have a combination of Saudi and foreign shareholders.
• They are suitable for a wide range of business activities and sectors.

1. Branch Office:

• Foreign companies often establish a branch office as an initial entry point into the Saudi market.
• Branch offices are suitable for businesses that want to maintain a direct presence without creating a separate legal entity.
• However, branch offices require a local Saudi service agent or sponsor.

1. Joint-Stock Company:

• Joint-stock companies are preferred for larger businesses with multiple shareholders and substantial capital requirements.
• They offer limited liability protection and are suitable for companies seeking public listing on the Saudi stock exchange.
• Foreign ownership in joint-stock companies is permitted in specific sectors.

The choice of entity depends on various factors, such as the nature of the business, planned activities, capital requirements, ownership structure, and long-term growth objectives. It’s essential to consult with legal and business advisors to determine the most appropriate entity option for your specific needs.

Yes, a local sponsor or service agent is generally required for foreign companies to open a branch office in Saudi Arabia. The sponsor is a legal representative and facilitator for the foreign company’s operations in the Kingdom.

The role of the local sponsor includes:

1. Assisting in obtaining necessary licenses, permits, and approvals from relevant government authorities.
2. Acting as a liaison between the foreign company and Saudi government agencies.
3. Providing administrative and logistical support for the branch office’s operations.
4. Ensuring compliance with local laws and regulations.

The requirement for a local sponsor stems from the Saudi government’s efforts to promote partnership opportunities between foreign and local businesses and ensure that foreign companies have a local presence and support system.

It’s important to note that the sponsor’s involvement is typically limited to administrative and facilitative roles, and they do not have any ownership or control over the foreign company’s branch office or its operations.

While a local sponsor is mandatory for branch offices, it may not apply to other business structures, such as limited liability companies (LLCs) or joint-stock companies, where foreign ownership is permitted in certain sectors.

The process of selecting and appointing a local sponsor involves careful consideration, as the sponsor’s reputation, experience, and connections can significantly impact the success and smooth operation of the branch office in Saudi Arabia.

To set up a branch office in Saudi Arabia, foreign companies must meet the following key requirements:

1. Local Sponsor or Service Agent: As mentioned earlier, a local Saudi sponsor or service agent must facilitate the branch office’s operations and act as a legal representative.
2. Parent Company Documents: Certified copies of the parent company’s incorporation documents, such as the Certificate of Incorporation, Articles of Association, and corporate structure information, must be provided.
3. Board Resolution: A board resolution from the parent company authorizing the establishment of a branch office in Saudi Arabia and appointing a branch manager or representative.
4. Business Plan and Financial Statements: A comprehensive business plan outlining the proposed activities, objectives, and financial projections, as well as the parent company’s audited financial statements for the past few years.
5. Commercial Registration: The branch office must obtain a commercial registration from the Ministry of Commerce and Investment (MCI) by providing the required documents and fulfilling the necessary conditions.
6. Office Space: Proof of secured office space or a lease agreement for the branch office’s premises in Saudi Arabia is typically required.
7. Capital Requirements: Depending on the nature of the business activities, the branch office may need to meet minimum capital requirements or financial guarantees.
8. Industry-Specific Licenses and Approvals: Certain business activities may require additional licenses or approvals from relevant ministries or regulatory bodies, such as the Ministry of Industry and Mineral Resources, the Saudi Food and Drug Authority, or the Capital Market Authority.

It’s important to note that the specific requirements and documents may vary depending on the industry, business activities, and regulations. Working with experienced legal and business consultants can help ensure a smooth and compliant branch office setup process in Saudi Arabia.

To set up a branch in Saudi Arabia, foreign companies must provide the following key documents:

1. Parent Company Documents:

• Certified copy of the Certificate of Incorporation or Registration
• Certified copy of the Articles of Association or Memorandum of Association
• Certified copy of the company’s corporate structure or shareholding information
• Board resolution authorizing the establishment of a branch in Saudi Arabia

1. Company Profile and Business Plan:

• Detailed company profile outlining the parent company’s history, activities, and global presence
• Comprehensive business plan for the proposed branch operations in Saudi Arabia
• Projected financial statements and feasibility studies

1. Financial Documents:

• Audited financial statements of the parent company for the past few years
• Bank references and proof of financial capacity

1. Representative or Branch Manager Information:

• Copy of the representative’s or branch manager’s passport
• Curriculum vitae (CV) or resume
• Proof of educational qualifications and professional experience

1. Local Sponsor or Service Agent Agreement:

• Contract or agreement with the appointed local Saudi sponsor or service agent
• Office Space Documentation:
• Lease agreement or proof of secured office space for the branch in Saudi Arabia

1. Capital Deposit Proof:

• Evidence of capital deposit or financial guarantee, if required by the relevant authorities

1. Activity-Specific Documents:

• Any additional documents or licenses required for the specific business activities or industry sector

It’s important to note that these documents may need to be authenticated, legalized, or translated into Arabic as per the requirements of the relevant Saudi authorities. Additionally, the list of required documents may vary depending on the nature of the business, industry sector, and specific regulations.

Working with experienced legal and business consultants can help ensure that all necessary documents are prepared accurately and comply with Saudi regulations for setting up a branch office.

Yes, foreign capital investment is still required to set up a trading business branch in Saudi Arabia in 2024. The Saudi Arabian General Investment Authority (SAGIA) maintains minimum capital requirements for foreign companies seeking to establish a branch office for trading activities in the Kingdom.
The minimum capital investment required for a trading business branch in Saudi Arabia is expected to be SAR 2.5 million (approximately USD 667,000). This represents an increase from the previous requirement of SAR 2 million as the Kingdom continues to attract more foreign direct investment and promote economic diversification.
The capital investment must be allocated towards the branch’s operations. It can be used for leasing or purchasing office space, hiring staff, procuring inventory, and covering other operational expenses related to the trading business.
It’s important to note that the capital investment requirement may vary depending on the specific trading activities and the nature of the goods being traded. SAGIA may impose higher capital requirements for specific industries or sectors deemed strategically important or requiring additional investment.
Capital investments can be made through cash deposited in a Saudi bank account or by transferring assets, such as machinery, equipment, or inventory, into the Kingdom. Foreign companies must provide evidence of the capital investment to SAGIA as part of the branch office registration process.

The minimum capital requirement for a Limited Liability Company (LLC) in Saudi Arabia varies depending on the ownership structure and the number of shareholders involved. Here are the typical minimum capital requirements:

1: For a single-shareholder LLC (owned by a Saudi or GCC national):

• The minimum capital requirement is SAR 300,000 (approximately USD 80,000).

2: For a multi-shareholder LLC (with two or more shareholders, regardless of nationality):

• The minimum capital requirement is SAR 500,000 (approximately USD 133,000).

It’s important to note that these minimum capital requirements are set by the Saudi Ministry of Commerce and Investment and are subject to change based on regulatory updates or specific industry requirements.

The capital contribution can be cash or in-kind contributions, such as assets, equipment, or intellectual property. However, at least 25% of the capital must be in cash, while the remaining portion can be in-kind contributions.

In certain cases, the Saudi Arabian General Investment Authority (SAGIA) or other relevant authorities may impose higher minimum capital requirements for specific industries or business activities, particularly those involving significant investments or considered strategically important for the Kingdom’s economic development.

It’s advisable to consult with legal and business advisors familiar with the Saudi regulations to ensure compliance with the minimum capital requirements and to explore any potential incentives or exemptions based on the specific nature and scope of the proposed business activities.