What Makes Saudi Business Setup Expensive? A Closer Look At Fees

The Saudi Arabian government is actively investing in non-oil sectors, like technology, tourism, manufacturing, and others, to create new Saudi Business Setup investment opportunities. Many changes are being introduced under the Vision 2030 plan to diversify the economy beyond the oil sector. Even though the government is reducing regulatory barriers and offering lucrative incentives, the business setup in Saudi Arabia is expensive, especially compared to other GCC business hubs, including the UAE. 

The Saudi government is creating profitable investment opportunities with massive infrastructure developments, like the Red Sea Project and NEOM, RHQ policy, visa advantages, and tax benefits. Despite these opportunities, the Saudi Arabia company formation fees are very high, especially for startup owners and small businesses. Keep reading this blog to understand what makes the Saudi business setup expensive, from the government fees to other charges. 

Top Reasons Behind the High Saudi Business Setup Cost

Despite the profitable incentives to reduce initial registration and setup fees, the business setup cost in Saudi Arabia is still expensive. Here are the top 10 reasons that will help you understand what makes the Saudi business setup costly compared to other GCC countries:

1. MISA License Fees (Ministry of Investment Saudi Arabia)

Every foreign business owner and investor in Saudi Arabia needs to secure an MISA license for legal business operations in the country. The cost of this license varies based on the type of business activity and generally ranges between SAR 2,000 and SAR 10,000. So, if you’re starting a company engaged in a business activity and with a company structure, subject to the costly Saudi business license cost, a business setup in KSA will demand a higher initial investment. Moreover, the annual renewal fees of this license make the overall setup cost expensive.

2. Commercial Registration (CR) and Chamber of Commerce Fees

The other factor that makes the Saudi business setup expensive is the cost you need to pay to the MoC to secure the mandatory CR. The cost to obtain and renew the CR depends on the type of business entity. Moreover, businesses also need to pay the fees to be a member of the Chamber of Commerce, which generally range from SAR 1,000 to over SAR 10,000 annually. If you have multiple branches or operate in different sectors in KSA, you need to pay for separate CRs, which makes the setup cost expensive. 

3. High Notarization and Legal Translation Costs

Another reason behind the costly Saudi Arabia company formation fees is the mandatory requirement to notarize the legal documents, like the MOA and board resolutions. The relevant authorities in KSA charge fees to verify the authenticity of the documents submitted during business setup. Moreover, all documents submitted to Saudi government bodies need to be translated into Arabic by a certified local translator. The cost of legal translation can be expensive depending upon the length and complexity of the document, the languages involved, and the urgent need. 

4. Saudization Compliance Costs

All businesses in KSA must hire Saudi nationals to maintain their compliance with Saudization policies. Hiring local employees is more expensive than hiring expats, as businesses need to pay them competitive salaries even for similar roles. Moreover, they need to invest in training programs to prepare a team with the necessary skills and other job requirements.

If you fail to comply with the policies of the Nitaqat system, you will be imposed with various penalties, including fines and blocked work permits for expats. Additionally, business owners need to invest in specialized HR platforms and payroll management systems to comply with GOSI regulations.

5. Paid-Up Capital Requirements

The cost of setting up a business in KSA is expensive due to the paid-up capital requirements, which vary depending on the business’s activity and structure. For example, LLCs have lower capital requirements than public companies, while these requirements are higher in commercial and property management sectors. Before establishing a business setup, business owners need to deposit the required funds in local banks to prove their financial stability.

6. Municipal and Office Setup Fees 

Unlike the Emirates, you can start a business in KSA with a virtual office setup. The mandatory requirement to lease a physical office adds to the startup expenses in Saudi Arabia, especially if the office space is located in a prime location. To secure a Municipality license, you need to provide physical office proof, which is an Ejari-registered commercial lease. 

7. Visa & Iqama Costs

Business owners need to pay for Iqama and visa costs to sponsor expat employees for their Saudi business setup. You need to deal with expenses, including government visa fees, dependent fees, annual renewal fees, health insurance charges, processing fees, and medical tests. When you sponsor multiple expat employees and their families, your overall business setup cost in Saudi Arabia becomes expensive. 

8. Bank Account Opening & Maintenance

Opening a company bank account in Saudi Arabia can be expensive for foreign businesses due to the lengthy process, which can even take weeks to complete. After submitting all the requested documents, banks conduct strong compliance checks to make sure the business complies with AML and CFT regulations. Besides the compliance check fees, you need to pay monthly or annual account maintenance fees and maintain a minimum balance. The bank also charges fees to issue the initial capital deposit certificate, leading to costly startup expenses in Saudi Arabia. 

9. ZATCA Registration and Tax Compliance

Another reason that makes the cost of setting up a business in KSA expensive compared to other GCC nations is the strict Zakat regulations. Zakat or ZATCA is the Saudi Arabian tax authority that applies many taxes and customs duties on businesses. Moreover, the constant changes in Zakat, VAT, and corporate tax policies make the assistance of an expert accounting, tax advisory, and consultancy partner necessary, adding to the overall setup costs. 

10. Consultancy & PRO Service Charges

Due to the complex procedures, ongoing compliance requirements, and strict regulations, many investors and businesses, especially non-resident companies, need to hire a professional business setup consultant. If you invest in services offered by a business setup firm with hidden charges, it will make your business setup cost in Saudi Arabia expensive. So, it is always advisable to secure services from a company that offers transparent pricing for all kinds of service packages, including monthly, annual, or one-time service fees. 

Simplify Saudi Business Setup with Express Business Service

Many factors, including MISA license fees, MoC registration charges, Chamber of Commerce membership fees, and others, make Saudi Arabia company formation fees costly. However, with expert support, you can navigate these challenges in the Saudi business setup. Connect with Express Business Service, the top-rated business setup consultant in KSA, to secure a profitable entry into the Saudi Arabian opportunity-filled business market.

From navigating licensing procedures to regulatory approvals, our team can assist you with everything. Moreover, we offer customized solutions with zero hidden charges, making sure our clients don’t have to face the issues of high-cost business setup. 

Also Read: Why Business Setup in Saudi Costly Compare then UAE