Demystifying Starting a Business in Saudi Arabia

The unique nature of the Saudi market and its abundance of opportunity is making it one of the world’s most desirable locations for entrepreneurs, start ups and multi-nationals looking to expand. For many though, Saudi Arabia is an entirely unknown location, with a range of important customs, cultures and traditions to be aware of, both socially and professionally. To help guide individuals and companies looking to invest in Saudi Arabia, we spoke to our Client Services Director Dan Dronsfield on what some of the key things to know are.

Here are some of the most important factors to consider when beginning your journey to starting a business in Saudi Arabia.

Routes to Market

For those considering starting a business in Saudi Arabia, there are four common routes to market to consider. The most popular is for corporate entities registered outside Saudi Arabia who can establish a Limited Liability Company (LLC), giving them full ownership and a direct presence in the Saudi market. For those with a profitable parent company that has been operational for at least one year, they might choose to establish a Branch of a Foreign Company. Multinationals might opt to establish a Regional Headquarters (RHQ) which comes with an excellent tax incentive whereby they enjoy a 0% corporate tax rate for a period of 30 years. Finally there is the option to partner with local agents and distributers which can be a faster route to market and provide invaluable local knowledge and expertise. This option would not require you to set up a company however you will have less control of your products in country.

Incorporation

The incorporation process has three main stages, which collectively can take around 18 to 28 weeks to complete. Each section has different requirements including document attestation and a variety of necessary registrations with governments entities and portals. Every established business will need to provide the following attested documentation:

• Certificate of Registration/Trade License
• Articles of Association or Memorandum of Association
• Audited financial statements for the previous fiscal year
• Certified corporate structure
• Power of attorney and Board Resolution detailing appointed representative and business activity

Operational Checklist

Registering your company is just the first step to becoming fully operational in Saudi and there are a list of key tasks that need to be completed before you can get started.

• If you are hiring foreign workers, you need to coordinate their visas and sponsorship
• You need to make sure your contracts are in accordance with Saudi labour laws and incorporate job duties, compensation and employee rights
• Your premises must have a municipal license (Baladiya) that shows it complies with zoning regulations and safety standards
• Your company needs to be registered with GOSI so it can contribute to social security benefits
• You must comply with e-invoicing regulations and adhere to ZATCA’s (The Zakat, Tax and Customs Authority) formats and requirements.

You may also want to consider connecting with on-going legal advisory services to ensure your business is always compliant and will avoid any issues.

Hiring Employees

When it comes to processing new hires, the timeline varies depending on whether the new employee is a Saudi national or an expatriate. Unsurprisingly, the process is the fastest for Saudi nationals, requiring just a few registrations and health insurance, and can be completed in 1-3 days. Expatriates will require more, especially if they are outside of the country. Employers are responsible for their work visa and immigration status, whether they need to secure a new one or transfer from an existing one. They will also need to coordinate medical testing and health insurance, obtain their Iqama (residency), complete the various registrations on government portals and pay the associated fees. EER Middle East will walk you and your employees through this whole process.

Taxation

Like most countries Saudi Arabia has a sophisticated tax system and it is important for companies to be aware of their obligations in order to avoid missed payments. The main ones to be aware of include the corporate income tax (20%), Zakat (2.5%) and the real estate transaction tax (5%). Oil and hydrocarbon production companies are also subject to a higher tax rate and GCC companies could be exempt from certain taxes depending on their nation’s arrangements with Saudi Arabia.

Saudisation

To help diversify the economy by increasing local participation in the work force, the Saudi Arabian government has implemented a policy of Saudisation. Officially known as the Saudi Nationalisation Scheme or Nitaqat, the policy requires all companies to employ a certain number of Saudi nationals that is determined by their size, location and industry. Companies found to be non-compliant could face penalties and those who meet or exceed their quota could be eligible for incentives like smoother visa processing and lucrative government contracts.

With so much potential and a range of exclusive benefits and incentives available, isn’t it time you began your Saudi business journey?

If you would like to speak to our expert local team regarding starting a business in Saudi Arabia and find out the answers to your questions on relocation, immigration and corporate services across Saudi Arabia, please get in touch today on info@eerme.com