You have a great product or service, and you are ready to expand into new markets. You know that you want to enter the Saudi market but that navigating the company structure and licensing decisions is less than straight-forward. Establishing in Saudi Arabia is the next step for your business and you want to retain full ownership and operational control.
We get it, when you are expanding to Saudi Arabia, one of the key elements is understanding how your company can be structured once set up in the Kingdom. No matter what country you are currently in, you want to be able to have control over your business when you expand.
Service Companies Can Be 100% Foreign Owned
Most sectors have 100% foreign ownership and no minimum capital required in order to expand to Saudi Arabia. There are a few sectors that are an exception to 100% foreign investment including asset management, banking, law, some sub sectors in printing and publishing, some areas of manufacturing, recruitment and consultancy (except higher management).
Another important sector to mention is trading, although trading companies can be 100% foreign owned, there are stringent regulations from MISA, such as SAR 30m capital to be injected in the first 12 months, three existing branches in other countries and SAR 300m investment over 5 years in the Saudi subsidiary.
Over 90% of the companies that AstroLabs has set up in Saudi Arabia are companies providing services. Service licences are a good option for many companies as there are much lower points to entry and around 4000 service categories listed as approved for foreign ownership.
How to Expand Your Business to Saudi Arabia
In order to start to expand your company to Saudi Arabia with 100%foreign ownership, you need to set up a subsidiary company of an existing entity and have 12 months of audited financial accounts, or be backed by a venture capital firm. If you have just shy of 12 months accounts, then it is worth speaking to an advisor as part of the process can be started and then continued once you have the 12 months completed accounts.
Foreign investors are required to obtain an investment license from MISA as part of the setup process, your local partner should be able to complete the MISA license registration for you.
You will also need to factor in ministry approval to your set up timeline. The business activity you choose needs to be approved by the relevant ministry, for example, if you are setting up a media company, you will require approval from the Ministry of Media. Get advice from your local partner on how to complete the approval process and at what stage of set up.
Choosing Between an LLC and Branch Entity
Companies who are looking to set up in Saudi usually consider between a limited liability company (LLC) or a branch entity. Both are the same structure, however we usually advise companies to choose LLC to put the responsibility onto the subsidiary rather than the parent company.
An LLC is able to engage in the full range of approved activities which fall under its category, both in the public and private sector. It is able to qualify for financing from the Saudi Industrial Development Fund at favorable rates for any industrial projects. An LLC can also sponsor its employees for residency purposes.
AstroLabs has detailed the full 16 step setup process including registering with the Ministry of Investment, Ministry of Commerce (Commercial Registration), Chamber of Commerce, Ministry of Labor. If you are looking for more information on Saudi setup, you can reach out to one of our team here.