Register Company in Saudi Arabia

Register Company in Saudi Arabia

To register company in Saudi Arabia is hassle-free, if you are familiar with the entire process. With Tetra Consultants at the wheel, you will be able to channel your time and energy into other more important aspects of your business.

With our lean-and-mean mentality, you can rely on our team of experts to provide you a seamless experience throughout the whole process of Saudi Arabia business set up. Our ultimate goal is for your Saudi Arabia company to be operationally ready within the stipulated time frame.

Our service package includes everything you will require to do business in Saudi Arabia:

• Company registration with Saudi Arabia Ministry of Commerce and Investment
• Local company secretary and registered address
• Opening local or international corporate bank account
• Tax registration
• Employment visa application
• Annual accounting and tax services

When can I expect to start business?

• Tetra Consultants will complete the process to register company in Saudi Arabia within 7 months after receiving due diligence documents of the directors and shareholders.

• Within 6 weeks upon registration, Tetra Consultants will open a corporate bank account with a local reputable bank.

• Consequently, you can expect to start operations in Saudi Arabia within 9 months upon engaging Tetra Consultants.

• If you are keen to know more about the process, Tetra Consultants has prepared a step by step explanation of all steps required to register company in Saudi Arabia.

Introduction to Saudi Arabia

• Saudi Arabia has an oil-based economy, with the largest proven crude oil reserves in the world, it is the largest oil-producing country. It possesses about 16% of the world’s proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 87% of budget revenues, 42% of GDP, and 90% of export earnings.

• In an effort to reduce economic reliance on the oil industry, Saudi Arabia, the Kingdom has been consciously diverting revenue earned from the oil industry into other sectors. According to the Investment Highlights Winter 2020 report, in 2019, 1,131 new international companies were incorporated in Saudi Arabia. Globally, Saudi Arabia is the seventh-largest stock market.

• As part of their Vision 2030, Saudi Arabia has introduced new procurement and insolvency law, improved legal infrastructure, a commercial arbitration center, new residency permits and faster procedures for incorporation in Saudi Arabia. Additionally, they also allowed full foreign ownership, as well as initiated a specialized entrepreneur license, which allows international entrepreneurs to launch a fully foreign-owned start-up company in Saudi Arabia within a day.

Types of business activities

• Gulf Cooperation Council (GCC), is the political and economic alliance of six Middle Eastern countries—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman. You will be subjected to a different legal regime compared to other members of the GCC and Saudi Nationals.

• There are several industries of opportunity including real estate, construction, hospitality as well as solar energy.

• This is seen in how Saudi Arabia is dominating the pace as one of the fasting growing sectors in terms of industrial projects and the construction industry. There is a sizeable opportunity to invest in this sector as there is an estimated USD$100 billion planned investment over the next decade with regards to the industry.

• Saudi Arabia boasts the largest market for medical equipment as well as healthcare-related products in the Middle East. Thus, there is an increasing demand for healthcare solutions to match the growing population, and there is ample opportunity to invest, from medical education or research to the building of medical facilities.

• Furthermore, the solar energy market in terms of the creation of alternative sources of power is encouraged by the government in an effort to reduce fuel pollution. Thus, this is also a viable industry to invest in dude to the hot climate in Saudi Arabia which eases the production of solar energy. Ways to get invested in the industry would include product sales of solar panels and others in the chain of this industry.

• In April 2000, the Supreme Economic Council (SEC) sanctioned the Foreign Investment Act (FIA), which refers to an extensive framework covering what non-Saudi nationals are entitled to invest in with regards to minority, majority or 100%-foreign-owned ventures.

Saudi Arabia Negative List

A list of commercial activities set out by the Supreme Economic Council (SEC) that is restricted from foreign investment under the Foreign Investment Law. There are 2 sections stated below that briefly include prohibition, refer to Appendix 1 for the full list of classifications with some stated exceptions provided by the Saudi Embassy.

Section 1: Industrial Sector

• Oil exploration, drilling and production
• Military equipment, devices and uniforms
• Civilian explosives.

Section 2: Service Sector

• Catering to military sectors.
• Security and detective services.
• Real estate investment in Makkah and Madina.
• Tourist orientation and guidance services related to Hajj and Umrah.
• Recruitment and employment services
• Printing and publishing (with exceptions)
• Distribution services, wholesale and retail trade
• Medical retail services and private pharmacies
• Commercial agencies (with exceptions)
• Audiovisual and media services.
• Telecommunications services (with exceptions)
• Land and air transportation.
• Satellite transmission services.
• Services rendered by midwives, nurses, physiotherapists and paramedics listed at 93191 by international classification codes.
• Blood banks, poison centers and quarantines

Requirements to register company in Saudi Arabia

According to the Saudi Arabia Ministry of Commerce and Investment, the minimum requirements for a Saudi Arabia limited liability company are:

• At least 1 director of any nationality (requirement may vary depending on the company structure) 
• 2 shareholders of any nationality (requirement may vary depending on the conditions to be complied with)
• 1 general manager that is a resident in the KSA
• Local registered address
• Minimum paid-up share capital of US$134,000 (required by Saudi Arabia General Investment Authority)

What types of companies are there?

Prior to register company in Saudi Arabia, it is essential to choose one that is most suitable for your business needs and long term goals. Once engaged, Tetra Consultants will fully understand your business structure and recommend the optimum business entity.

Saudi Arabia Limited Liability Company (LLC)

Foreign companies mostly choose to locally register Saudi Arabia Limited Liability Company (LLC). The advantages include the ability to sponsor its employees for residency purposes and also engage in the entire array of activities governed by the approved objects of the company. An LLC may also promote and engage in business throughout the kingdom.

Key features of a Saudi Arabia LLC

• A minimum of 2 and a maximum of 50 shareholders may form a company. However, with effect from 2016 under the amended Company Law of Saudi Arabia. An LLC can also be formed with one shareholder (of any nationality and can be natural and legal person) However, the sole shareholder of an LLC is prohibited from holding a sole shareholder position in another LLC.

• The minimum capitalization requirements set by SAGIA are SAR$25 million (USD$6.65 million) for agricultural projects and SAR 1 million for industrial projects. There is no minimum capitalization for other projects. SAGIA and MOCI may require larger capitalization at their discretion.

• A negative list released by SEC contains the list of activities in which companies incorporated with foreign participation may not engage.

• The company has to retain 10% of its net profits to be under a statutory reserve, and this reserve has to accumulate until it is equivalent to at least 30% of the original capital of the company.

Advantages

• The ability to sponsor residency to its employees.

• The ability to qualify for favorable financing rates from the Saudi Industrial Development Fund if the company is operating in the industrial sector.

• The ability to promote and solicit business throughout the Kingdom, for business-related to both the public and private sector.

Disadvantages

• Business activities of the LLC are only limited to those approved by SAGIA and set forth in its Articles of Association.

• Foreign partners will not have full control over company management unless the other partner is an affiliate.

• Sizeable initial capitalization is required.

• Inability to become a partner in another company in Saudi Arabia that is involved in similar or overlapping businesses.

Joint Stock Company (JSC)

When registering a Saudi Arabia company, some foreign investors choose to incorporate a Joint Stock Company (JSC). In the case of Joint Stock Company, requirements are identical to a Saudi Arabia Limited Liability Company (LLC), however, a minimum of 2 shareholders and 3 directors of any nationality must be appointed. There is no maximum number of shareholders and a Saudi company can be formed by 2 affiliated foreign companies.

According to the Company Law of Saudi Arabia as amended in the year 2016, all the JSC in Saudi are now be formed with the minimum of 2 shareholders (irrespective of nationality and can be natural person/corporate shareholder) as opposed to the old requirement of 5 shareholders. While a single shareholder closed-JSC can be established or owned only by:

• Saudi Government;
• Saudi Government establishments;
• entities wholly owned by the SaudiGovernment;
• Any company with a minimum SAR$5 million (US$1.33 million) capital.

Key features

• There is a minimum share capital required of US$134,000 and this has to be paid-up in full (25% of the total capital) in order for the incorporation of the company can be finalized. This is also the minimum amount of capital for a closed JSC.

• Liability of the debts of a JSC would be borne by the shareholders, however, only to the extent of their capital shares.

• Similar to an LLC, the company has to retain 10% of its net profits to be under a statutory reserve, and this reserve has to accumulate until it is equivalent to at least 30% of the original capital of the company.

• A board of directors should be elected to administer a JSC, and the number of people on the board should be between 3-11.

Advantages

• The ability to sponsor residency to its employees.

• The ability to qualify for favorable financing rates from the Saudi Industrial Development Fund if the company is operating in the industrial sector.

• The ability to promote and solicit business throughout the Kingdom, for business-related to both the public and private sector.

• The amount of flexibility with regards to shares transfer is comparably higher than that of an LLC following the 2-year lock-up period.

• The issuance of shares and bonds reduces the difficulty in obtaining capital.

Disadvantages

• Business activities of the LLC are only limited to those approved by SAGIA and set forth in its Articles of Association.

• Foreign partner will not have full control over company management unless the other partner is an affiliate.

• Sizeable initial capitalization is required.

• Inability to become a partner in another company in Saudi Arabia that is involved in similar or overlapping businesses.

• Shares held by the founders are to be kept during the lock-up period

• Regulation by Saudi Arabia is more stringent for JSCs as compared to LLCs.

Branch Office

A company where it is a requirement that a legal representative resident be appointed to manage the branch. More stringent rules are applicable to foreign clients as this form or corporation can only be fully owned by GCC members, where it can only be established by a GCC company.

Capital requirements of a branch are similar to both LCC and JSC, where the company has to retain 10% of its net profits to be under a statutory reserve, and this reserve has to accumulate until it is equivalent to at least 30% of the original capital of the company.

Advantages

• Relatively easier process for formation as compared to the aforementioned business entities. This is seen in how there is no need for any Articles of Association to be approved, although processing time for approval may be lengthier for foreigners.

• The ability to promote and solicit business throughout the Kingdom, for business-related to both the public and private sector, unlike a Representative Office.

Disadvantages

• Business activities of the LLC are only limited to those approved by SAGIA and set forth in its Articles of Association.

• The interconnectedness of the firm’s legal identity may lead to double taxation.

• Sole proprietorship insinuates that the burden of financial liability be carried upon the owner of the branch, where minimum capital is to be forked out on their own.

• The lack of a Saudi partner may also pose a difficulty in terms of operations.

How to register company in Saudi Arabia?

In order to complete your Saudia Arabia company registration process smoothly, we recommend that you follow the steps below:

Advantages of doing business in Saudi Arabia

There are plenty of pros when it comes to choosing to register company in Saudi Arabia. Tetra Consultants makes use of the PESTLE analysis to provide some insights on why multiple foreign investors set up companies in Saudi Arabia every year.

Political

• Findings from Deloitte’s “Doing Business Guide” in Saudi Arabia highlights that the Kingdom has placed its focus on developing economic cities, industrial hubs and healthcare facilities that offer a plethora of business opportunities.

• World Bank Group’s Doing Business 2020 report: highlighted Saudi Arabia amongst this year’s top 10 global business climate improvers.

Economical

• Saudi Arabia boasts the largest economy in the Middle East, with high macroeconomic stability, low debt and a strong budget surplus.

• GDP per capita is high, and Saudi Arabia receives imports of around USD$134.7 billion worth of goods and services each year. The high volume represents profound spending power amongst Saudi nationals and the high standard of living as it is a high-income country.

• According to World Bank, Saudi Arabia is amongst the fastest business climate improvers.

Social

• Under its Vision 2030 program, Saudi Arabia has set the target of increasing foreign investment from 3.8% to 5.7% of the country’s GDP.

• Saudi Arabia has also listed raising the current contribution of SMEs to GDP from 20% to 35% by 2030 as a top priority.

• Figures from SAGIA show it issued 267 new licenses to foreign investors during the first quarter of 2019, marking an increase of 70% when compared to the same period last year. SAGIA also launched Venture by Invest Saudi, an initiative to attract international VCs and their portfolio companies.

• Clients are able to incorporate a business in Saudi Arabia with 100% foreign ownership.

• Foreign companies need not engage a Saudi agent to bid for government contracts pertaining to operations in Saudi Arabia.

• Foreign companies incorporated in the industrial market are exempted from customs duties on equipment.

• Foreign companies incorporated in the industrial market will be able to take interest-free loans of up to 50% of the total cost of the project.

Technological

• Saudi Arabia boasts the largest IT industry in the Gulf region. This market is growing exponentially with support from the government, such as the Communication and Information Technology Commission, which has plans to increase the computer literacy of the nation in an effort to successfully implement 5G services.

• This is supported by the Special Economic Cloud Zone Law sanctioned by the GAZT in 2019 that intends to attract foreign investment in Saudi Arabia’s IT industry.

Legal

• In 2018, foreign investment license provider SAGIA announced it would grant licenses in less than four hours, accelerating the process from the previous average of 53 hours.

• In Saudi Arabia’s Vision 2030 plan, the government has currently implemented 57% of 400 planned reforms. There has also been the introduction of new procurement law, improved legal infrastructure, a new insolvency law, a commercial arbitration centre, new residency permits and faster business registration procedures.

• SAGIA has launched a specialized entrepreneur license, which allows international entrepreneurs to launch a fully foreign-owned start-up company in Saudi Arabia within a day.

• Saudi Arabia has granted 10-year tax concessions to 6 underdeveloped provinces in the Kingdom, in an effort to generate investments on any projects situated there. This is inclusive of the states of Ha’il, Jazan, Najaran, Al-Baha, Al-Jouf, as well as the Northern territory.

Environmental (Renewable Energy)

• Saudi Aramco has unveiled plans to increase spending over the next decade, specifically in the renewable energy sector. This is to provide additional privatization and introduce a renewable energy program to accomplish their goal of generating 95GW of renewable electricity by 2023.

• Government program Mutjadeda disclosed that business projects related to renewable energy will receive government support through loans.

Disadvantages of doing business in Saudi Arabia

Despite the multiple advantages, there are definitely some well known disadvantages of doing business in Saudi Arabia. Prior to Saudi Arabia company formation, it is essential that you are aware of these cons as they may affect the long term business goals of your company. Tetra Consultants makes use of the PESTLE analysis to provide some insights into why some foreign investors choose not to register Saudi Arabia companies.

Deferred Deal Execution

• This would be due to the presence of red tape where excessive government bureaucracy occurs due to the presence of corruption in Saudi Arabia.

• Saudi Arabia ranks as 109th in the world for the ease of starting a business. This score underlines the difficulty of entering this market as a foreigner.

High Costs

• Minimum paid up share capital for foreign companies registered in Saudi Arabia starts at US$134,000 for service licenses and can escalate up to US$8,000,000 for real estate licenses.

• Value-added tax (VAT) of 5%.

• High corporate income tax rates on foreign owners’ share of profits at 20%.

Government Restrictions

• There are certain restrictions on foreign investment. This includes the oil, fishing, printing & publishing, consulting, and recruitment & employment services industry.

• There are restrictions on professional services businesses, where there is a requirement of part Saudi ownership, set at a minimum of 25%.

Contact us to find out more about how to register company in Saudi Arabia. Our team of experts will revert within the next 24 hours.