Business Setup for ForeignersHow Can Foreigners Set Up a Company in Saudi Arabia
As the Kingdom opens to the world for business, foreigners have several options to start a business entity in Saudi Arabia including options with 100% foreign ownership.
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 to set up their business 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 will depend on the foreigner's specific needs and circumstances. The following scenarios should help you gain the required knowledge on how to start a business in Saudi Arabia for foreigners.
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.
Waagner Biro Steel and Glass' Success Story
An Austrian firm with a rich history of 165 years, Waagner Biro Steel and Glass provides innovative engineering solutions encompassing design, build, and construction for government and private clients. Its work on the Floating Bridge, the Al Noor Island Development, and the Al Maqta Bridge in UAE underscore how well-matched the firm is to Saudi’s construction project types, scales, and timescales. The construction company’s experience, expertise, and willingness to embrace challenges make them perfect partners for Saudi projects aligned with the ambitious objectives of Vision 2030 for economic diversification and the regeneration of the economy.
Jason Wilson, General Manager of Waagner Biro Steel and Glass explained that the historic firm was attracted by: “A market that’s too big to ignore.”
Recognizing the fit between their skills, and ambition and Saudi’s vision for a more sustainable, diverse future, they partnered with AstroLabs’ experts to negotiate the best way to get involved.
“We have the technology and the people to deliver projects in Saudi. It’s better to be in than out. Events like World Cup 24, the 2029 Asian Winter Games, and Expo 2030 provide deadlines that create a stronger focus and will accelerate Saudi construction over the next 10, 20, and 30 years.” Jason expanded.
Considering the transformation of Saudi’s urban landscape, entering the Kingdom was an obvious next step, but they needed local expertise and support. AstroLabs helped them expand into the region by being their eyes and ears on the ground, easing the company’s entry into Saudi’s dynamic market. After talking with AstroLabs, their path into Saudi became clear. The on-ground team was able to support the construction company and help them fulfill their entry requirements efficiently so they may fulfill their ambitions in KSA.
Jason advises anyone thinking about expanding into Saudi that engaging with the local market and establishing strong networks are foundational to success in the Kingdom.
“It takes face-to-face interaction … Don’t waste any time developing strategies. Get in there, check the market, the suppliers, the capacities. … The earlier you’re in, the earlier you can pick up the changes and adapt.“
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.
Read more details about the license types or use our search to find the right license according to your business activity.
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.
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