How to set up a business in Saudi Arabia as a foreigner

As the world’s leading oil exporter, Saudi Arabia has historically hinged its economic prosperity on the oil industry. However, this narrative is gradually changing as the country pivots towards diversifying its economy and nurturing a robust private sector.

The introduction of a new companies law, easing of foreign ownership restrictions and a commitment to streamline bureaucratic processes have all contributed to a more investor friendly climate, catalysing significant growth in key sectors such as energy, manufacturing, technology, healthcare, and tourism.

In fact, between 2017 and 2021, FDI inflows surged tenfold from USD 1.42 billion to USD 19.29 billion, demonstrating the heightened investor confidence and Saudi Arabia’s status as an increasingly attractive and lucrative investment destination.

This article outlines the essential steps for foreign companies venturing into this evolving market, shedding light on the key considerations for a seamless and compliant establishment process.

Initiating the journey: Ministry of Investment licence application

The first step towards setting up a business in Saudi Arabia is preparing all the necessary documentation. This will vary depending on the nature of the business activity and chosen company structure but will generally include:

• Completed application form for the foreign investment licence
• Business plan outlining the proposed activities, objectives and financial projections
• Memorandum and Articles of Association (drafted and notarised)
• Resolution and Power of Attorney
• Passport copies and background information for all shareholders, directors and company signatories

Certain documents may need to be notarised and legalised by the Saudi Embassy or Consulate in the home country of the foreign investor before they can be submitted.

Once you have all this in place you can proceed with obtaining the investment licence from the Ministry of Investment (MISA), the government authority responsible for overseeing the licensing and registration of foreign businesses.

MISA will assess the viability and clarity of your company’s business plan, ensuring it aligns with local regulations and economic objectives. It will then review the company ownership structure, financial stability and capability to sustain its operations and contribute to the local economy.

Once it’s satisfied that the company meets its criteria, it will issue the licence. This usually takes between 2 and 4 weeks, although in some cases, particularly for companies in strategic or sensitive industries, additional approvals or security clearances may be required which may prolong the process.

Crucial connectivity: Engaging with the Chamber of Commerce

The next stage in the business setup process is registration with the Chamber of Commerce (CoC). This crucial step verifies and legalises corporate documents, laying the foundation for subsequent procedures and visa issuance for employees. By utilizing CoC’s services, your company ensures the authenticity and validity of its documents, establishing a solid foundation for operations.

Human capital compliance: Ensuring compliance with the Ministry of Labour

If you intend to hire non-Saudi employees, registration with the Ministry of Labour (MoL) is mandatory. Adherence to MoL’s regulations and rules is essential for your company to issue work permits and visas for its workforce. The Ministry of Labour uses the Qiwa platform for various labour-related services and you’ll need to create an account on the platform to initiate the registration process. You’ll then have to provide detailed information about your business, including the type of industry, ownership structure, and other relevant details, along with personal details, educational qualifications, and other relevant information of each non-Saudi employee you intend to hire.

Upon successful verification, the Ministry of Labour issues work permits for the non-Saudi employees at which point you can proceed to apply for their visas.

After entering Saudi Arabia, your employees need to apply for residency permits, known as Iqama which is a crucial legal document that validates their residency and work status in the country.

Financial Responsibility: Registration with General Organisation for Social Insurance

It is then necessary to register your employees for social insurance with the General Organisation for Social Insurance (GOSI). On a monthly basis, companies are required to calculate and submit social insurance contributions through the GOSI platform, with the amount being a percentage of each employee’s monthly salary. The platform serves as a centralised system for managing social insurance matters, providing companies with access to reports, services, and tools for updating employee information and tracking contribution history.

The process involves initial company registration on the GOSI platform, where details such as the company’s name, address, and legal documents are provided. Following this, you can proceed to register each employee, providing details like name, nationality, job title, and salary information. GOSI then classifies employees based on factors such as salary and job category, determining the corresponding contribution rates.

These contributions are crucial as they contribute to employees’ benefits, including medical coverage, work injury compensation, and pensions. Maintaining regular compliance is paramount, with companies submitting accurate and timely information, such as updates on employee status and salary changes.

Tax and regulatory compliance: Engaging with the Zakat, Tax & Customs Authority

Every company operating in Saudi Arabia must register with the Zakat, Tax, and Customs Authority (ZATCA). Post-registration, fulfilling tax obligations, including withholding tax payments, VAT filing, and corporate income tax payments, becomes essential. ZATCA’s online portal streamlines these tax-related activities, ensuring your company’s compliance with Saudi Arabia’s tax laws and regulations.

Physical presence: Registering the national address

Another prerequisite in the business registration process is the submission and registration of a physical office address. Saudi Post (SPL) oversees this requirement, facilitating essential services such as e-commerce and postal services.

The registered National Address provides companies with a recognised and verified physical location. The system is also integrated into various government systems, ensuring that accurate location information is available for official purposes, including licensing and regulatory compliance and access to government services such as licence renewals, permit applications, and other regulatory requirements.

Financial infrastructure: Finalising the bank account opening process

With the preceding steps completed, your company is then able to open a corporate bank account. Some prominent local banks with corporate banking services include Saudi National Bank (SNB), Al Rajhi Bank, and Riyad Bank. There are also a number of international banks such as HSBC and Citibank with a notable presence.  The account opening process can usually be completed in 2-4 weeks contingent on factors such as ownership structure complexity and the chosen bank’s Know Your Customer (KYC) requirements.

You’ll need to provide company registration papers, proof of identity for authorised signatories, and a letter of introduction to initiate the process, then undergo a review before approval is granted.

Conclusion

In summary, the process of setting up a business in Saudi Arabia is a systematic journey, navigating which with the right understanding and expertise ensures a successful venture in the Kingdom’s evolving market. Each step is a crucial building block, contributing to the establishment of a robust business presence and ensuring compliance with the country’s regulatory framework.

How can Global Link help?

Global Link has over 16 years’ experience working with local and global businesses, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.

We can significantly streamline the Saudi company setup process by offering expert guidance and support at every stage. From navigating the complexities of government registrations, such as obtaining the Foreign Investment Licence and coordinating with the Ministry of Labour, to ensuring compliance with social insurance and facilitating the registration of the National Address, we bring a wealth of knowledge that expedites the process. Our key contacts with relevant authorities and extensive experience in handling documentation and regulatory requirements will ensure a smooth and efficient incorporation process.

If you need advice on this or any other company incorporation, visa or PRO service, please get in touch with us on +971 4 553 9901 or email us at [email protected] and we will be happy to assist you.