Business Setup Process in Saudi Arabia
Saudi Arabia has a very large economy as compared to other countries in the Middle East. Businesses can expand their operations as the place gives a profitable market to the owners. The demand for goods and services is relatively high, and the population is ever-growing. This makes it an ideal place to invest and help entrepreneurs grow their businesses.
Knowing the proper business setup process in Saudi Arabia is essential to get the most out of it. Here, we give an insight into the same.
Choosing the Right Type of Business Entity
If you are starting a business in Saudi, you must know what type of business entity will be suitable for you. There are different types from which you can choose as per your requirements.
Limited Liability Company (LLC)
If you are a foreign investor, this is the most common business entity you can invest in. A minimum capital of 500,000 SAR is required to set up an LLC. Another requirement for the LLC to function is that you should have at least one shareholder and one director.
Joint Stock Company (JSC)
To start a joint stock company, you need at least 5 million SAR as capital. This type of business entity offers shares to the public. A JSC must have a smallest of three directors and five shareholders to start.
Branch Office
To open a branch office in Saudi Arabia, it is not necessary to create an autonomous entity. You need at least 500,000 SAR as capital and at least one representative to open a branch office.
Representative Office
A representative office permits a foreign company to conduct market research and endorse its services or products in Saudi Arabia. But this office won’t be able to generate any revenue or earn income.
Registration and Licensing
After deciding on the business body, you must go for company registration in Saudi Arabia with the appropriate authorities. The following steps have to be fulfilled for the registration process:
Pre-Registration Process
Carry Out A Name Search– Make sure the business name you finalise is available and goes with the Saudi rules.
Getting a SAGIA License– Getting a license from the Saudi Arabian General Investment Authority is necessary to get started. The organisation is now known as the Ministry of Investment of Saudi Arabia.
Registering with the Ministry of Commerce and Investment– Register your organisation with the Ministry of Commerce and Investment if you want a commercial registration certificate.
Registration Process
Submitting your Application– Based on the type of business, you need to apply for registering it.
Registering your Company Name- The next step is registering your company name with the Ministry of Commerce and Investment.
Providing Required Documents– Necessary documents like a copy of your passport, proof of address, and business plan are required.
Getting a Commercial Registration Certificate – Getting a commercial registration certificate is essential to start your business in Saudi.
Opening A Bank Account – The initial capital needs to be deposited in the right place. To do this, you have to open a local bank details in Saudi Arabia.
Post-Registration Process
Getting a Tax Identification Number
You need to get this number from the General Authority of Zakat and Tax after your registration is complete.
Getting other Necessary Licenses and Permits– There are other extra permits and licenses that you can get from different authorities. The licenses that you need to get will depend on the type of business you are going to run.
Registering with the GOSI– If you have employees in your company, you need to register with the General Organisation for Social Insurance.
Getting A Labour License– This license is also necessary for companies with employees.
Following Saudization Rules– For this, your business has to hire a specific percentage of Saudi nationals.
Other Requirements
Apart from the above points, it would be best if you also kept certain things in mind. Get health insurance for your employees as well as residence permits for those who are not residing there. Other licences like trade licenses, industrial licenses, environmental licenses, and health licenses are required as per your business requirements.
Taxation Requirements to Consider
For companies that are owned by non-residents, there is a corporate income tax of 20 percent. If the company is Saudi-based, they have to pay 15 percent Value Added Tax and a 2.5 Percent Zakat. The payments that are made to non-residents 5 to 20 percent goes for withholding tax.
Business Etiquette
It is essential to follow some business etiquette when you are thinking of a business setup process in Saudi Arabia.
Respect for Islam– Being an Islamic country, it is essential that your business should respect Islamic traditions and customs.
Business Cards– When starting a business in Saudi, use both Arabic and English in your business cards.
Dress Code– The dress code for the employees and other staff should be modest and give respect to Islamic traditions.
Gift-Giving– The gifts that you give, should not feel like bribe and must be respectful.
Employment and Labour Laws to Follow
When you start your business in Saudi Arabia, you should be aware of the labour and other employment laws.
Employment Contracts– The contract for your employees should comply with Saudi labour laws, and it should be written in Arabic.
Working Hours– You can make your employees work a maximum of 8 hours a day and 48 hours a week.
Minimum Wage– For Saudi nationals, you have to pay 3000 SAR per month.
End-of-Service Benefits– Must be given to employees who have completed at least 2 years of service.
Apart from all these when you go for company registration in Saudi, you should protect your business with the necessary trademarks, copyrights, patents, and trade secrets.
So, if you set up a business in Saudi Arabia, make sure you are well aware of the different rules and regulations in the country. Knowing about company setup regulations, business licenses, registration process, and other laws will help you go through a smooth setup process. Keep the traditions also in mind to avoid facing any problems.