Saudi Company Formation

Company formation-UAE, Saudi, QATAR , KUWAIT , BAHRAIN & OMAN

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Setting up a company in Saudi Arabia requires compliance with the regulations of the Ministry of Investment of Saudi Arabia (MISA) and other relevant authorities. The process has been streamlined in recent years to encourage foreign investment and diversify the economy in line with Vision 2030. Below is a general overview of the requirements and steps for establishing a company in Saudi Arabia.

1. Choose the Type of Company

There are several business structures to choose from, depending on the business activity, capital investment, and number of shareholders. The most common company types include:

Limited Liability Company (LLC): The most popular structure for foreign investors; requires at least one shareholder.
Joint Stock Company (JSC): Suitable for larger enterprises; requires a minimum of five shareholders.
Branch Office: For companies that wish to open a branch of their foreign business in Saudi Arabia.
Single-Person Establishment: Owned by a single individual with limited liability.
Technical and Scientific Office (TSO): For foreign companies to promote their products without engaging in direct sales.

2. Foreign Ownership and Partner Requirements

In most sectors, 100% foreign ownership is allowed. However, some sectors (such as real estate, retail, and trading) may require a Saudi partner or have restrictions.
For restricted sectors, you will need to establish a partnership with a Saudi national or a Saudi-owned company.

3. Minimum Capital Requirements

For most sectors, there is no minimum capital requirement for an LLC.
Certain sectors, such as banking and insurance, require a significant minimum capital investment.
Joint Stock Companies (JSCs) must have a minimum capital of SAR 500,000.

4. Business License

Depending on the type of business activity, you will need a license from the relevant authorities:
1. Commercial License: For trading and retail activities.
2. Service License: For service-oriented businesses such as consultancy or IT.
3. Industrial License: For manufacturing or industrial activities (issued by the Saudi Industrial Development Fund).
4. Professional License: For professional services such as law, engineering, or accounting.

5. Choose a Business Activity

Select the type of business activity you wish to engage in. Ensure that the activity aligns with the Saudi Arabian General Investment Authority (SAGIA) list of permissible business activities. Activities range from trading, consulting, manufacturing, and construction to technology and media.

6. Trade Name Registration

Choose a unique trade name for your company that complies with the guidelines set by the Saudi Ministry of Commerce. It must not resemble existing company names or violate public morals or Saudi customs.

7. Obtain an Investment License (MISA License)

Foreign investors must obtain an Investment License from the Ministry of Investment of Saudi Arabia (MISA) to legally own and operate a business in the country.
Required documents for MISA license application:
1. Copy of passport of the company owner or shareholders.
2. Proof of experience in the business activity (for certain sectors).
3. Financial statements from the last financial year (for established companies).
4. Business plan or feasibility study (for new companies).
5. Initial capital deposit evidence (if required).

8. Prepare the Memorandum of Association (MoA)

Draft a Memorandum of Association (MoA), which outlines the company's purpose, capital, ownership structure, and management structure. The MoA must be notarized and submitted to the Saudi Ministry of Commerce.

9. Register with the Ministry of Commerce

After obtaining the investment license, you must register your company with the Ministry of Commerce (MoC). The documents needed for registration include:
1. MISA License
2. MoA
3. Trade name reservation certificate
4. Shareholders’ details (passport copies, national IDs, etc.)
After completing the registration, you will receive a Commercial Registration (CR) certificate.

10. Open a Corporate Bank Account

Once the company is registered, open a corporate bank account with a Saudi bank. You will need:
1. Commercial Registration (CR) certificate
2. MISA License
3. Shareholders’ details
4. Company address proof (office lease agreement)
5. Resolution of board authorizing the opening of the bank account

11. Office Space and Lease Agreement

Secure a physical office space in Saudi Arabia. A lease agreement must be submitted as part of the registration process.

12. Register with the General Authority for Zakat and Tax (GAZT)

Register your company for Zakat and Value Added Tax (VAT) with the General Authority of Zakat and Tax (GAZT). All companies must comply with VAT and tax requirements, even if they are 100% foreign-owned.

13. Employee Visas and Labor Law Compliance

After setting up the company, you can apply for residency visas (Iqama) for your employees. The number of visas issued depends on the size of the company and the type of business.
Register with the Ministry of Human Resources and Social Development (HRSD) and the General Organization for Social Insurance (GOSI) to comply with labor laws and employee rights.

Required Documents for Company Formation in Saudi Arabia:

Passport copies of shareholders and managers.
Proof of residence (utility bills, etc.).
Trade name reservation certificate.
MISA Investment License.
Memorandum of Association (MoA).
Commercial Registration (CR) certificate from the Ministry of Commerce.
Lease agreement for office space.
Bank account opening documentation.
Zakat and VAT registration documents.

Key Benefits of Saudi Company Formation:

100% foreign ownership in most sectors.
No personal income tax for individuals.
Corporate tax rate of 20%, with potential exemptions in Free Zones.
Access to a large and growing market in the GCC region.
Favorable investment incentives under Vision 2030.
Strategic location for doing business in the Middle East, Asia, and Africa.

Additional Considerations:

Certain sectors like oil and gas, education, and healthcare may have additional regulations or restrictions.
Saudization (localization) rules apply, requiring businesses to hire a certain percentage of Saudi nationals, depending on the sector.

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