Important Steps to Business Setup in Saudi Arabia

Saudi Arabia, with its rapidly growing economy and strategic location, has become a preferred destination for foreign investors and entrepreneurs. The Saudi government, through its Vision 2030 initiative, has opened its doors to foreign businesses, making it easier for investors to start a business in Saudi Arabia. However, despite the improvements, there are still crucial steps that need to be followed to ensure a smooth business setup in Saudi Arabia. Here, we’ll go over the important steps to establishing a business in Saudi Arabia and explain key concepts such as obtaining a trade license in Saudi Arabia.

Know the Steps to Business Setup in Saudi Arabia

1. Understand the Business Landscape

Prior to beginning the procedure of registration, it’s vital to gain a solid understanding of the Saudi market. Saudi Arabia’s economy is diversifying, moving away from oil dependency and encouraging sectors such as technology, healthcare, tourism, and construction. For foreign investors, this presents exciting opportunities, but it’s important to conduct thorough market research and understand which sectors are most welcoming to foreign investment.

As part of your preparation, familiarize yourself with the business setup in Saudi Arabia regulations and requirements. It’s helpful to consult with a local business consultancy or a legal expert to guide you through the rules and ensure compliance.

2. Choose the Right Business Structure

When setting up a business in Saudi Arabia, foreign investors must decide which type of legal structure is most suitable. The common types include –

  • Limited Liability Company (LLC) – The most popular option for foreign businesses, as it limits shareholders’ liability and is relatively easy to manage. An LLC can have up to 50 shareholders, and investors typically opt for this structure due to its flexibility and legal protections.
  • Branch of a Foreign Company – A foreign company can establish a branch office in Saudi Arabia, which operates under the parent company’s name. While it is not an independent legal entity, it can conduct commercial activities in the country.
  • Joint Stock Company (JSC) – Suitable for larger enterprises planning to raise capital by offering shares to the public. However, the regulatory requirements for JSCs are stricter than for LLCs.
  • Representative Office – This setup allows a foreign company to establish a non-trading office for market research or promotional purposes. However, it cannot engage in commercial activities.
  • Choosing the right business structure will depend on the scale of your operations, the type of industry, and your long-term business goals in Saudi Arabia.

3. Obtain a SAGIA License

Foreign investors must apply for a license from the Saudi Arabian General Investment Authority (SAGIA). This license is mandatory for foreign businesses that wish to start business in Saudi Arabia. Without it, foreign companies cannot operate legally in the Kingdom.

The process involves –

  • Submitting a detailed business plan.
  • Providing documents such as passports, financial statements, and other relevant company documents.
  • Ensuring the business aligns with Saudi Arabia’s Vision 2030 goals.

Once SAGIA approves the application, you will receive an investment license that allows you to continue with the business registration process.

4. Draft the Articles of Association

For businesses like LLCs, the next step is to draft the Articles of Association (AOA), which outlines the company’s purpose, the number of shareholders, share distribution, and management structure. It is vital to confirm that this document is properly drafted in both English and Arabic. The AOA must be notarized by a public notary in Saudi Arabia.

5. Obtain a Commercial Registration (CR)

Once the AOA is completed, the next step is to obtain a Commercial Registration (CR) from the Ministry of Commerce and Investment (MCI). The CR is the official document that confirms the existence of the business as a legal entity in Saudi Arabia.

To get the CR, the following must be submitted –

  • Notarized Articles of Association.
  • SAGIA investment license.
  • Bank certificate showing that the company’s share capital has been deposited.

6. Apply for a Trade License in Saudi Arabia

A trade license in Saudi Arabia is required to legally operate any business in the Kingdom. This license is issued by the Saudi Arabian Ministry of Commerce and allows the business to conduct its activities within the country. Relying on the nature of your business, additional approvals from relevant government departments may also be required.

For example, if your business operates in the healthcare, manufacturing, or education sectors, you might need specific sector approvals before you can start operating.

7. Open a Bank Account and Deposit Capital

After obtaining the Commercial Registration, you must open a business bank account with a local Saudi bank. For an LLC, shareholders are required to deposit the minimum capital (as stipulated by the law) into the bank account. The bank will issue a capital deposit certificate, which is required for the final stage of business registration.

8. Register with GOSI and Zakat

All businesses operating in Saudi Arabia are required to register with the General Organization for Social Insurance (GOSI). This ensures that employees are covered under social insurance programs. Additionally, foreign businesses must register with the General Authority of Zakat and Tax (GAZT) for tax purposes.

9. Obtain Visas and Work Permits

If you plan to employ foreign staff or expatriates in your business, you will need to apply for work visas and permits for them. The process for obtaining these visas can be complex, so it’s advisable to seek professional assistance. The Saudi Ministry of Labor and Social Development regulates the issuance of these visas, and companies must comply with Saudi labor laws when hiring foreign staff.

10. Hire Local and Foreign Talent

Saudi Arabia has specific labor laws that prioritize the employment of Saudi nationals. This is part of the country’s Saudization policy, which aims to increase the participation of local talent in the workforce. Businesses must adhere to these regulations and ensure that a certain percentage of their employees are Saudi nationals, depending on the sector and size of the company.

While foreign talent can still be hired, meeting Saudization requirements is crucial to avoid penalties.

11. Post-Registration Obligations

After the successful business setup in Saudi Arabia, there are ongoing obligations to keep the company operational. These include renewing the Commercial Registration annually, filing tax returns, and maintaining accurate financial records. It’s important to stay updated with local regulations to avoid non-compliance penalties.

Conclusion

The process of business setup in Saudi Arabia has become much more streamlined in recent years, but there are still important steps to follow. From obtaining a trade license in Saudi Arabia to registering with various government bodies, each step requires careful attention to detail.

By understanding the process, foreign investors can successfully navigate the requirements and regulations, ensuring a smooth entry into one of the most promising markets in the Middle East. With the right planning and local assistance, you can establish and grow your business in Saudi Arabia, taking advantage of its robust economy and growth potential.

Get In Touch

Simply Contact Us at +971545094393 / +966548681590 / info@expressservice.sa or leave your details and well get in touch with you soon !