Setting Up a Foreign Company in Saudi Arabia: Saudi Arabia, with its strategic geographic location, robust economic framework, and ambitious Vision 2030 initiative, has emerged as a prime destination for foreign enterprises aiming to expand into the Middle East. Notable mega-projects like NEOM, a futuristic city with an investment of US$ 500 billion encompassing 14 business sectors, highlight the country’s forward-thinking approach.

The Kingdom offers a business-friendly atmosphere, and recent reforms have significantly eased the process of foreign company incorporation. In this detailed guide, we explore the steps to establish a foreign business in Saudi Arabia, focusing on the essential aspects and the exceptional support provided by EPRO Business Development’s legal experts and the Saudi government. This comprehensive support ensures a smooth entry into this vibrant market.

Understanding the Business Landscape in Saudi Arabia

Saudi Arabia has made significant strides in welcoming foreign businesses, expatriates, and tourists by reducing entry barriers and simplifying the processes for business incorporation and relocation. The introduction of visa-on-arrival for many European nationalities exemplifies the Kingdom’s dedication to facilitating international travel.

Living in Saudi Arabia has become increasingly positive, with initiatives aimed at creating a foreigner-friendly environment that rivals global standards. This transformation makes the country a more appealing and accessible hub for individuals and businesses looking for new opportunities.

Saudi Arabia’s business landscape is both diverse and dynamic, encompassing sectors such as oil and gas, health and biotechnology, technology and IT, FMCG, finance, manufacturing, design and construction, education, research and innovation, food, energy, tourism, sport, mobility, media, and entertainment and culture.

Before establishing a foreign company, it is essential to conduct comprehensive market research to understand the opportunities and challenges within your chosen industry. Our legal and financial experts provide support from the initial stages of incorporation in Saudi Arabia and continue to offer assistance as your business grows.

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Advantages of Establishing a Foreign Company in Saudi Arabia

Establishing a foreign company in Saudi Arabia offers numerous benefits for international businesses aiming for growth and expansion. With recent reforms and the ambitious Vision 2030 initiative, the Kingdom has become an attractive destination for foreign investors. Here are the key advantages of incorporating a foreign company in Saudi Arabia:

• 30-Year Tax Breaks: Companies relocating their regional headquarters to Riyadh can benefit from extended tax breaks, a significant economic incentive.
• 100% Foreign Ownership: In certain sectors, foreign investors are now permitted full ownership of their companies, eliminating the previous requirement for local partnerships.
• Simplified Legal Procedures: The Saudi government has optimized the incorporation process, making licensing, registration, and compliance procedures more efficient.
• SAGIA Assistance:The Saudi Arabian General Investment Authority (SAGIA) offers comprehensive support to foreign investors, providing assistance with licensing and regulatory requirements through a one-stop-shop approach.
• Vision 2030 Incentives: In line with Vision 2030, the government offers various incentives, including tax breaks and customs duty exemptions, to encourage foreign businesses to contribute to economic diversification.
• Specialized Economic Zones: Foreign companies can operate in specialized economic zones tailored to specific industries, offering dedicated infrastructure and support.
• Financial Support Programs: The Saudi Industrial Development Fund (SIDF) and the Saudi Export-Import Bank (Saudi Exim) provide financial support to eligible foreign businesses, fostering growth and sustainability.
• Strategic Location:Saudi Arabia’s geographic position serves as a gateway to the Middle East and beyond, facilitating easy access to regional markets.
• Thriving Industries: Sectors such as technology, healthcare, and education are booming, offering lucrative opportunities for foreign companies to capitalize on the Kingdom’s economic growth.
• Low Crime Rate:Saudi Arabia boasts one of the lowest crime rates in the world, ensuring a safe environment for business operations.
• Cultural Understanding: Gaining insight into local customs and business etiquette is essential for building successful relationships in the Saudi market.
• Promising Future: With ongoing economic reforms and a commitment to modernization, Saudi Arabia’s business landscape offers a promising future for foreign companies, positioning them for sustained success in the Middle East.

Vision 2030 and Economic Reforms

Vision 2030, spearheaded by Crown Prince Mohammed bin Salman, is a transformative initiative aimed at diversifying the Saudi economy and reducing its dependence on oil. The reforms include measures to enhance the ease of doing business, encourage foreign investment, and create a more vibrant entrepreneurial ecosystem.

Types of Business Entities in Saudi Arabia

Foreign investors looking to establish a business in Saudi Arabia have several business structure options to consider, each offering unique benefits and requirements. These options include:

• Limited Liability Companies (LLCs)
• Joint Stock Companies (JSCs)
• Regional Headquarters (RHQ)
• Technical and Scientific Services Offices (TSSOs)
• Branches of Foreign Companies

The selection of the appropriate structure will depend on the specific nature of the business, as well as the desired level of control and liability investors are willing to assume.

100% Foreign Ownership in Saudi Company

One of the most notable recent changes is the allowance for foreign investors to have full ownership of their companies in certain sectors. This marks a significant departure from the previous necessity of having a local partner or sponsor. Now, sectors including engineering, education, healthcare, and information technology permit complete foreign ownership of companies in Saudi Arabia.

Legal Procedures for Foreign Company Incorporation in KSA

The incorporation of a foreign company in Saudi Arabia involves several legal procedures. These steps include obtaining the necessary licenses, registering with the Saudi Arabian General Investment Authority (SAGIA), and adhering to local regulations. The Saudi government has simplified these processes to create a more efficient and investor-friendly environment. The main stages of foreign company incorporation in Saudi Arabia include:

A. Planning and Strategy

B. Company Incorporation

C. Bank Account Opening

A. Planning and Strategy for Foreign Company Incorporation in Saudi Arabia

During the planning and strategy phase, clients must make several critical decisions, including:

• Selecting the type of business entity, such as LLC, JSC, RHQ, TSSO, etc.
• Choosing a business entity name or brand name.

Certain documents must be prepared in advance before the incorporation process, including notarized and legalized parent company documents in the Kingdom of Saudi Arabia. Our legal experts will assist in preparing the following documents:

• Memorandum & Articles of Association (M&AA) of the parent company
• Business License for the company
• Company’s Incorporation Certificate
• Company’s Board Resolution
• Power of Attorney

B. Foreign Company Incorporation Process in Saudi Arabia

Expanding business operations to Saudi Arabia involves navigating a detailed regulatory landscape. The foreign company incorporation process includes several key steps:

1. Application for Investment LicenseThe process starts with submitting an application for an investment license to the Saudi Arabian General Investment Authority (SAGIA), now known as the Ministry of Investment of Saudi Arabia (MISA) since 2020. This step requires providing detailed information about the business activities to be established.
2. Articles of AssociationCompanies must draft and submit their Articles of Association, a legal document outlining the company’s structure, purpose, and operational guidelines. This document is crucial for the registration process.
3. Company Name RegistrationSelecting and registering a suitable business name with the Unified Centre is essential. The name should comply with Saudi Arabian naming conventions and be distinct from existing businesses.
4. Registration with MERASCompanies must register with the Ministry of Commerce and Investment’s online portal, MERAS, which facilitates the integration of information related to the commercial registration process.
5. Issuance of SAGIA/MISA Foreign Business LicenseUpon approval of the foreign business investment license application, SAGIA/MISA issues a Foreign Business License, allowing the company to operate in Saudi Arabia. This license enables the company to sign contracts, issue invoices, and hire employees.
6. Company Seal CreationThe company must create an official seal for use in formal documentation and transactions, including:
   • Agreements and contracts
   • Shareholder and management resolutions
   • Official letters and notices
   • Government documents
7. Registration at the Chamber of CommerceRegistering with the local Chamber of Commerce is mandatory. The applicant company must submit the Certificate of Membership obtained from the Chamber of Commerce and Industry (CCI) within 30 days of commercial registration.

C. Opening of Bank Account

To facilitate financial transactions, foreign companies must open a local bank account in Saudi Arabia. This is often a prerequisite for conducting business activities within the country.

Diligently navigating these steps ensures a successful incorporation of a foreign company in Saudi Arabia, establishing a compliant and robust presence in the Kingdom’s dynamic markets.

By understanding the legal procedures, leveraging incentives, and embracing the local culture, businesses can position themselves for success in one of the Middle East’s most dynamic markets. Contact our expert legal business consultant to make foreign company incorporation in Saudi Arabia