Company Registration in Saudi Arabia in 2023-24
Saudi Arabia, a rapidly growing economy in the MENA and MEASA regions, offers a diverse range of corporate opportunities for aspiring investors and business owners.
The Kingdom of Saudi Arabia presents an incredible prospect for establishing businesses in the Middle East market. According to the World Bank’s 2020 report, Saudi Arabia ranks 62nd in terms of ease of doing business.
Recognizing the advantages that different businesses bring, the Saudi government actively encourages investors from the business sector to join and pursue their entrepreneurial dreams in the region.
Compared to the past, the process for your company registration in Saudi Arabia has been greatly simplified. Additionally, the implementation of flexible corporate laws in the area allows business investors to explore new markets.
However, if you have made the decision to register a company in Saudi Arabia, it is essential to have a comprehensive understanding of the various options available and the Saudi Arabian laws that may impact your business registration process.
How to Start a Company in Saudi Arabia?
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.
What are the documents required to register a company 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 forms 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. A minimum of one stakeholder, who can be an individual or a business entity, and a minimum of one director are required for this type of corporate organization. Nevertheless, if there are over twenty stockholders, a board of directors must be appointed.
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.
Partnership
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.
Sole Proprietorship
This is a business entity owned and operated by a single individual. The proprietor is completely accountable for the firm’s debts.
Branch Office
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.
Representative Office
Another one of the businesses that can be established in Saudi Arabia is a representative office. In the case of a representative office, the parent corporation has complete authority over the representative office.
What are the eligibility criteria for company formation in Saudi Arabia?
Here are the general eligibility criteria for Saudi Arabia company registration:
Shareholder and Director Requirements
It is necessary to have a minimum of 1 shareholder and a minimum of 1 director in order to start a limited liability corporation in Saudi Arabia.
Registered Office Address
Having a registered office address where business correspondence and notices can be issued is essential.
Foreign ownership
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.
Capital requirement
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.
Local sponsorship
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.
Company name
The firm should possess a unique and not already enrolled with the Ministry of Commerce and Industry (MOCI).
Legal documents
The firm should possess a Memorandum of Association and Articles of Association that have been translated into Arabic and notarized.
Business activities
The company’s business activities must fall within the scope of the commercial licence issued by the Ministry of Commerce and Industry.
Compliance
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%.
- Real Estate Transaction Tax (RETT): The RETT is levied at a rate of 5% of the total worth of property that is sold, irrespective of the property’s status, design, or intended use at the time of sale.
- Municipality Tax: Companies are subject to a tax on commercial activities, which is typically between 2% and 5% of their revenues.
How much cost required 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.
What are the benefits for Starting a Company in Saudi Arabia?
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.
Conclusion
Saudi Arabia, a country that seamlessly connects Asia, Europe, and Africa, offers numerous benefits in terms of accessibility. Moreover, it boasts strong connections with developed nations, making it an ideal destination for business ventures.
To further enhance its economic prospects, the Saudi Arabian government launched the Vision 2030 initiative in 2016. This ambitious project aims to attract foreign investment, improve investment opportunities, and foster economic participation in the private sector, both domestically and internationally.
However, navigating the process of registering a company in Saudi Arabia can be overwhelming and costly. It is crucial to have local support, whether it be a partner, agency, or consultancy, to ensure the success of your business. Without proper knowledge of the local commercial environment and regulatory standards, it can be challenging to thrive.
That’s where OnDemand International comes in. We specialize in assisting businesses like yours to enter the Saudi Arabian market and establish a strong local presence. Our team of professional experts at OnDemand International can guide you through the intricate process of company registration in Saudi Arabia, ensuring a smooth and successful transition.
FAQ’s
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.
Yes, South Arabia has enabled its firm to accept payments from customers all over the world due to advances in technology and international payment networks. South Arabia has a number of payment platforms that make it simpler to take payments from around the world, including pay tabs, 2checkout, and Amazon Payment Services.
By receiving payments from all over the globe, you may increase your revenue, attract more clients outside of your country of residence, and create more chances for working with other international companies.
