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An Overview on How to establish a Company in Saudi Arabia

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Ashik T N
An Overview on How to establish a Company in Saudi Arabia

Why establish a company in Saudi Arabia?


Saudi Arabia, well known for its massive oil sector, has the largest free-market economy in the Middle East and North Africa (MENA), accounting for around 28% of the total Arab GDP. The position allows them easy access to several export markets, including Europe, Asia, and Africa. Domestic consumption, fueled by a young and prosperous community, is steadily and consistently expanding local demand and hastening the rate of company formation in Saudi Arabia.


As part of a significant privatization effort, KSA, which has the best business climate and political stability, provides cheap energy costs and 100% foreign ownership in retail and wholesale industries. Trade License in Saudi Arabia


Issam Abousleiman, World Bank Regional Director for the Gulf Cooperation Council (GCC) and the Middle East and North Africa (MENA), stated, "Saudi Arabia's impressive reforms in doing business this year demonstrate its commitment to fulfilling the main pillar of its National Vision 2030: a thriving economy." "Easing the business climate for local entrepreneurs to prosper as well as international investors to operate in the Kingdom offers a forward road to producing more jobs for Saudi youth and women, as well as fostering sustainable, inclusive growth," he said.


Major changes aimed at attracting more international investment and conducting business in Saudi Arabia are being implemented.


A one-stop shop for easing and streamlining business setup.

Minority investor protection

Simpler and more convenient Contract enforcement

Credit will be more readily available as a result of revised bankruptcy and secured transaction laws.

Online construction permit platform

Trading and investing across borders

Insolvency and financial restructuring are simple to resolve.

Increasing power availability.


Which industries are promising for new business establishment in Saudi Arabia?


High living standards and a young population are strengthening domestic demand, and numerous commercial sectors are now giving enormous success and growth opportunities in the KSA. The following are some profitable business sectors in Saudi Arabia.


Hospitality and tourism

Real Estate Lubricants, Glass, and Plastics Steel Manufacturing Engineering and Technology

Education, healthcare, and pharmaceuticals, as well as financial services

Entertainment and media.


How to Establish a Business in Saudi Arabia

Saudi Arabia is continuously pursuing its privatization ambitions and aiming to make the business formation process quicker and more straightforward, even while Policy Reforms are underway. Within six to nine months, one might anticipate finishing company registration in Saudi Arabia and begin conducting business.


1. Planning and Strategy for Pre-Incorporation


Due diligence is performed on the best business kind, paid-up capital and licensing requirements throughout this step. The following are a list of issues to consider during this phase.


The name of the company/business

The Business Entity Type; LLC, JSC, Branch Offices, or Other

Documents such as a business license, a certificate of incorporation, a board resolution, a power of attorney, and so on.


How free zones aided diversification of The Saudi Economy

To encourage international investment in commercial and industrial activity, Saudi Arabia has established two types of free zones. While industrial free zones primarily serve the manufacturing industry, economic free zones were established to support essential economic activities like as agriculture, healthcare, education, logistics, science and research, and so on.


Industrial cities were established in the 1980s and later evolved into major economic centers. Economic cities were founded around the turn of the century and are currently being built. Both the industrial and economic free zones allow for 100% foreign ownership while also providing tax breaks and low tax rates.


Saudi Arabia's Tax System


Employee earnings are not subject to personal income tax; rather, businesses are taxed based on the type of business and its structure.


The corporate tax applies to all registered firms, including corporations and branches controlled by foreign investors. Non-listed corporations are subject to a 20% tax rate.


The tax is levied based on net profits. For non-Saudi and non-GCC nationals, interest income is taxed as well. Saudi and GCC nationals, on the other hand, must pay a 2.5% religious tax known as Zakat.


Activities Prohibited for Foreign Investors The service sector is open to 100% foreign investment. Foreign investors are generally forbidden from engaging in trading and retail operations. The list of prohibited activities below includes, but is not limited to


Manufacturing of defense and military equipment, including uniforms and associated devices

Security and Investigation Companies

Brokerage firms in Real Estate Drilling and Exploration of Oil and Gas Fishery Business Medinah and Makkah Real Estate Investment Printing and Publication Business.


Capital Required as a Minimum


Although there is no legislative minimum capital requirement, SAGIA typically mandates international LLCs to have a minimum capital of SAR 500,000. The minimum paid-up capital requirements are determined by activities.


100% Foreign Commercial: SAR 30 million, with an investment commitment of at least SAR 200 million in the first five years.

25% off commercial Saudi Partner: SAR 7 million, with a minimum investment of SAR 20 million from the international investor.

SAR 30 million in service and property investment

SAR 20 million in trade

Transport Service: SAR 500, 000

Agriculture: 25 million SAR

SAR 500,000 for contracting

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