Foreigners who want to start or expand a business in Saudi Arabia have a number of different business structure options to choose from. The best option for you will depend on your specific needs and circumstances. This article will provide an overview of the different business structure options available to foreigners in Saudi Arabia, as well as the key factors to consider when choosing a business structure.
Can a foreigner set up a business in Saudi Arabia?
Yes, foreigners can set up a company and launch their business in Saudi Arabia. The Saudi Arabian government has made a number of reforms in recent years to make it easier for foreigners to start and operate businesses in the country, even with 100% ownership. These reforms include reducing the minimum capital requirement for foreign investment, simplifying the process of obtaining an investment license, opening up new sectors to foreign investment, and establishing a number of special economic zones that offer additional incentives to foreign investors.
Foreigners can choose from a variety of business structure options when setting up a business in Saudi Arabia, including:
- Subsidiary of a Foreign Company
- Limited Liability Company (LLC)
- Joint Stock Company (JSC)
- Regional Headquarters (RHQ)
- Technical and Scientific Services Office (TSSO)
The best business structure for a foreigner will depend on their specific needs and circumstances. The following scenarios should help you find the right solution.
Despite the challenges, there are a number of opportunities for foreign companies to set up businesses in Saudi Arabia. The Saudi government is committed to attracting foreign investment and offering several incentives to foreign investors. Suppose you are considering setting up a business in Saudi Arabia. In that case, it is important to consider the benefits and challenges involved carefully and it is always recommended to consult with a qualified consultant.
5 scenarios for foreign company setup in Saudi
Scenario 1: Expanding an existing company to Saudi Arabia
Saudi Arabia offers a variety of investment opportunities for foreign companies, with nine different types of licenses issued by the Ministry of Investment of Saudi Arabia (MISA):
- Service license
- Industrial license
- Agricultural license
- Real estate license
- Trading license
- Mining license
- Professional license
- Scientific & Tech office
- Economic & Tech Liaison office
Not all of these licenses allow for 100% foreign ownership without conditions. Only services, industrial, and agricultural investments are eligible for 100% foreign ownership without conditions. Other investment types, such as trading, have requirements such as having four branches around the world and a capital of SAR 10 million. Additionally, some investment types, such as capital and real estate investments, require 25% Saudi ownership.
Scenario 2: Expanding an existing company fully owned by GCC nationals to Saudi Arabia
Companies 100% owned by GCC nationals that want to expand into Saudi Arabia can do so by establishing a branch office or a subsidiary.
- Branch Office: A branch office is a legal entity that is established in Saudi Arabia as an extension of a GCC company. The branch office has its own legal personality and is separate from the parent company. However, the parent company remains liable for the debts and liabilities of the branch office.
- Subsidiary: A subsidiary is a separate legal entity that is established in Saudi Arabia and owned by a GCC company. The subsidiary has its own management and board of directors.
“GCC-owned subsidiaries can also merge multiple business activities on their licenses. We had a client who needed to include over 100 activities on their license and it was only possible to do so because they were GCC-owned,” explains Fahad Algahtani, Senior Account Manager at AstroLabs.
Scenario 3: Individual foreigner who wants to start a new company in KSA
There are only limited options for individual foreigners who want to start a new company in Saudi Arabia. You will need to have a support letter from a government entity (MISA, PIF, CODE, KAUST, TDF, etc.) or a patented idea to establish your fully owned new company. If you meet one of these requirements, you are eligible to establish a Limited Liability Company (LLC): An LLC is a business that is owned by one or more shareholders. The shareholders have limited liability, meaning that they are only liable for their investment in the company.
Scenario 4: Individual GCC national who wants to start a new company in KSA
GCC nationals have the same rights as Saudi nationals when it comes to starting a business in Saudi Arabia. They can choose from the same business structure options as Saudi nationals, including sole proprietorships, LLCs, and joint stock companies.
Abeer Alghamdi, Project & Client Associate at AstroLabs highlights an important condition for this scenario: “To start a new company in KSA as an individual GCC national, you will need to provide a certificate that you are not a government employee, as well as a police clearance.”
Scenario 5: Entrepreneurial license for startups
The Saudi government offers an entrepreneurial license for startups. To qualify for an entrepreneurial license, your startup must be at least five years old and meet one of the following criteria:
- It is VC-backed
- It has a patented idea.
- It has a support letter from a government entity (MISA, PIF, CODE, KAUST, TDF, etc.).
To apply for an entrepreneurial license, your startup must also have been accepted by a Saudi-based incubator such as AstroLabs.
The registration fees are SAR 12,000 and renewal fees are SAR 62,000 annually for MISA license. For the Entrepreneurial license, the registration fees are SAR 2,000 with following amounts for renewals: SAR 2,000 for year 2 and 3, SAR 12,000 for year 4 and SAR 62,000 annually after that. But note that there are also other costs to be considered when it comes to registering your business, such as: Commercial Registration and renewal fees (SAR 1,200 annually), Chamber of Commerce registration and renewal fees (SAR 10,000 annually). These fees can change often and without notice.
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