Company Registration in Saudi Arabia in 2023-24
Saudi Arabia, one of the biggest arising economies of the MENA and the MEASA regions, provides a wide range of corporate options for upcoming investors and company owners.
The Kingdom of Saudi Arabia holds a phenomenal opportunity for the formation of business in the
Middle East market. As per the 2020’s World Bank report, Saudi Arabia secured 62nd place in ease of doing business.
Eventually, the Saudi government spotted the benefits of different businesses and urged investors from the business sector to join and start their dream ventures in the region.
In comparison to the past, the procedure for company registration in Saudi Arabia has been significantly simplified. Furthermore, the introduction of flexible corporate laws which are prevalent in the area permits business investors to explore new markets.
If you’ve decided to register a company in Saudi Arabia, though, it is crucial to have a complete understanding of the various options along with Saudi Arabian laws that may affect you while you think about registering a company in Saudi Arabia.
Procedure for Saudi Arabia Company Registration
The procedure for company registration in Saudi Arabia typically involves the following steps:
Step 1:- Choose a company name and make sure it is available and not already registered with the Ministry of Commerce and Industry (MOCI).
Step 2:- Obtain the essential licences and permits for your business.
Step 3:- Prepare and submit the required legal documents, such as articles of incorporation and bylaws, to the MOCI. All the documents must be translated into Arabic and notarized.
Step 4:- Register the company with the MOCI by submitting the legal documents and paying any required fees. The MOCI will then issue a commercial registration certificate.
Step 5:- Register with the General Authority of Zakat and Tax (GAZT) by submitting the commercial registration certificate and obtaining a tax registration number.
Step 6:- Register with the Ministry of Interior and obtain an immigration card for any expatriate employees.
Step 7:- Set up a corporate bank account for your firm in Saudi Arabia.
It is important to note that the process and requirements for company registration in Saudi Arabia can vary depending on the type of company, the industry it operates in, and the number of shareholders involved.
Documents Required for Company Registration in Saudi Arabia
Here are a few of the essential documents that might be expected for company registration in Saudi Arabia:
- Company name reservation certificate: This certificate confirms that the proposed company name is available and not already registered with the Ministry of Commerce and Industry (MOCI).
- Memorandum of Association: This document outlines the company’s objectives, capital, and shareholders. It must be translated into Arabic and notarized.
- Articles of Association: This document outlines the firm’s internal regulations and management structure. It must be translated into Arabic and notarized.
- Copies of the passports of the firm’s stakeholders and directors.
- Copies of the commercial registration certificates of the company’s shareholders and directors.
- A lease agreement or ownership documents for the company’s office or commercial location.
- A power of attorney if the company is being registered by an agent or representative.
It is important to note that the specific requirements can vary depending on the kind of firm and the business it functions in.
Types of Companies for Company Registration in Saudi Arabia
Several types of business could be registered when you think to register a company in Saudi Arabia.
The most common form of business for company registration in Saudi Arabia are:
Limited Liability Company (LLC)
It is one of the common forms of business entities in Saudi Arabia. An LLC is a privately owned firm with one or more shareholders, who are only accountable for the firm’s losses to the extent of their share capital.
Joint Stock Company (JSC)
This is a publicly owned company that can have an unlimited number of shareholders. Shareholders are accountable for the firm’s losses to the extent of their share capital.
This is a business entity formed by two or more partners who share the revenues and debts of the company. Partners are accountable for the firm’s losses to the extent of their stake capital.
This is a business entity owned and operated by a single individual. The proprietor is completely accountable for the firm’s debts.
This is a business entity that is a branch or subsidiary of a foreign company. The parent firm is accountable for the debts of the branch office.
It is important to note that certain types of businesses may be restricted to certain types of business entities, or may require additional licences or permits.
Eligibility for Saudi Arabia Company Registration
Here are the general eligibility criteria for Saudi Arabia company registration:
Foreign investors are allowed to own 100% of the shares in a company in Saudi Arabia, except for certain sectors such as retail and wholesale trade, real estate and construction, and some professional services, where a minimum of 51% of the shares must be owned by a Saudi national.
There is no minimum capital requirement for company registration in Saudi Arabia, however, the company must have enough capital to meet its financial obligations and ensure its sustainability.
Foreign investors are required to have a local sponsor or “sahib al-amm” who is a Saudi national. This sponsor acts as a liaison between the company and the government and is responsible for obtaining the necessary licenses and permits for the company.
The firm should possess a unique and not already enrolled with the Ministry of Commerce and Industry (MOCI).
The firm should possess a Memorandum of Association and Articles of Association that have been translated into Arabic and notarized.
The company’s business activities must fall within the scope of the commercial licence issued by the Ministry of Commerce and Industry.
The company must comply with all relevant laws and regulations in Saudi Arabia, including labour laws, tax laws, and environmental laws.
It’s crucial to remark that the above requirements may vary depending on the type of company registration in Saudi Arabia is done.
Various Taxes on Saudi Arabia Company Registration
There are several taxes that companies registered in Saudi Arabia may be subject to:
- Value Added Tax (VAT): A standard rate of 15% is applied to the sale of goods and services in Saudi Arabia. Firms with an annual turnover of higher than SAR 375,000 must register for VAT.
- Income Tax: Firms are liable to corporate income tax on their earnings at a rate of 20%. However, companies in the oil and gas sector are liable to various tax regimes.
- Zakat: This is an annual wealth tax, imposed on companies and individuals at a rate of 2.5%.
- Excise Tax: Certain goods such as tobacco, soft drinks, and energy drinks are subject to an excise tax of 100%.
- Customs Duty: Import and export of goods may be subject to customs duty, which is typically between 5% and 10%.
- Municipality Tax: Companies are subject to a tax on commercial activities, which is typically between 2% and 5% of their revenues.
Cost to Register a Company in Saudi Arabia
The cost to register a company in Saudi Arabia can vary depending on several factors, such as the type of company, the business activities, and the location of the company. Here is a general overview of some of the costs that may be incurred when Saudi Arabia company registration is done.
For private companies, the minimum share capital for private companies is fixed at 2,000,000 SAR in the case of general partnership firms, a minimum of 500 SAR is required for the two partners, and in a partnership limited by stakes, the least capital is required, i.e 2 million SAR.
Why register a company in Saudi Arabia?
There are several reasons why an entrepreneur may choose to register a company in Saudi Arabia, including:
- Saudi Arabia is the biggest economy in the Middle East and has a population of over 30 million which offers a base with higher purchasing power.
- And the Geographical location makes it a perfect region for industries intending to tap into international markets.
- Saudi Arabia is actively working to diversify its economy away from oil and gas and is encouraging foreign investment in other sectors such as technology, healthcare, and renewable energy.
- The Saudi government has implemented various initiatives to support the growth of small and medium-sized enterprises (SMEs), including funding and training programs.
- Saudi Arabia has abundant natural resources, including oil, natural gas, and minerals, which can provide advantages for certain types of businesses.
- Saudi Arabia has a stable legal and regulatory habitat that is facilitative for doing business.
It is important to note that doing business in a foreign country is also associated with certain challenges, such as cultural and language barriers, different business practices, and unfamiliar laws and regulations.
Advantages of Saudi Arabia Company Registration
There are numerous benefits to Saudi Arabia company registration, including:
- Adequate Location: Saudi Arabia is placed at the intersections of Europe, Asia, and Africa, making it a favourable spot for companies looking to expand their business in the Middle East and beyond.
- Large Market: Saudi Arabia has a big and thriving customer market, with a population of over 30 million people.
- Economic Reforms: The Saudi government has implemented several economic and social reforms, including the Vision 2030 strategy, which aims to diversify the economy and promote private sector growth.
- Access to Resources: Saudi Arabia has abundant natural resources, including oil and gas, which can be leveraged by companies in the energy sector.
- Strong Infrastructure: Saudi Arabia has a well-developed infrastructure, containing airports, seaports, and highways, which gives rise to companies to transport goods and services within the country and internationally.
- Government Support: The Saudi government provides several incentives and support to encourage foreign investment, such as tax exemptions, subsidies, and fast-track procedures for company registration.
- Access to Talent: Saudi Arabia has a highly educated and skilled workforce, which can provide companies with access to a talented and diverse workforce.
It’s important to note that while Saudi Arabia offers a lot of business opportunities, it’s also a complex market with unique cultural and legal considerations.
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The Kingdom of Saudi Arabia is smoothly accessible to countries like Asia, Europe, and Africa. Apart from this benefit in terms of accessibility, Saudi Arabia is extremely well-connected and has a friendly connection with developed nations.
In addition, the Saudi Arabian government embarked on the Vision 2030 initiative in 2016 to improve investment opportunities in KSA and encourage more foreign investment and promote greater international and domestic economic participation in the private sector.
Eventually, registering a company in Saudi Arabia could be a daunting and costly procedure. It’s recommended to get assistance from professional experts from Odint Consultancy to guide you through the process of company registration in Saudi Arabia.
When a company is established in a Saudi business within the first year, initial registration and setup charges are reduced by two-thirds which appeals to the newest entrepreneurs in the market.
Foreigners can apply for an organisation within Saudi Arabia and have 100% ownership.
Limited Liability Firm is the most popular type of corporate structure that is used within Saudi Arabia. Small businesses can establish an LLC to avoid double taxation.
For private firms, the least share capital for a private firm is fixed at 2,000,000 SAR; in the case of general partnership firms, a least 500 SAR is expected from the two partners.
The tax rate for taxes on earnings is 20% of the net adjusted profit.