How to Own Your Company in KSA: There are some legal procedures required for company registration in Saudi Arabia. In this article we have discussed company formation in KSA such as why to own your company in KSA, types of companies in Saudi, when to own your company, and how to own your company including legal requirements, etc.
Why to Own Your Company in KSA
There are many reasons why you should own your company in Saudi Arabia such as the huge oil industry. The other cause to own your company in KSA can be the Kingdom
is the largest free-market economy in the Middle East and North Africa (MENA). Saudi Arabia represents an approximate 28% share of total Arab GDP.
The Kingdom’s geographic location is appropriate for easy access to many export markets like Europe, Asia and Africa. Its domestic consumption is increasing steadily due to a young and wealthy community and continuously expanding local demand for a more diverse nature of company formation in Saudi Arabia.
The highest level of safe and secure business atmosphere and political stability in the country provides an opportunity to own your company in KSA at low energy cost and 100% foreign ownership in retail and wholesale sectors because of a large privatization programme under National Vision 2030.
Issam Abousleiman, the World Bank Regional Director of the Gulf Cooperation Council (GCC) and MENA, said that Saudi Arabia’s impressive reforms in doing business show its commitment to fulfill its National Vision 2030 for a thriving economy. He also said that easing the business climate in the Kingdom for local as well as foreign investors to own your company in KSA reflects a forward path to creating more jobs for Saudi youth and women, and creating sustainable development with inclusive growth.
Other reasons to own your company in Saudi Arabia is its major reforms attracting more foreign direct investments (FDI) are:
- Single window system to simplifying and easing company formation
- Enforcement of contracts in simple and easy way
- New insolvency law promotes availability of credits
- Protection of minority investors in the Kingdom
- Construction permits available at online platform
- Promotes cross border trading and investments
- Cheap availability of power
Types of Companies to Own in Saudi Arabia
The Kingdom of Saudi Arabia, known for its emerging economies in the MENA and South Asia regions provides the opportunity to own your company in Saudi Arabia. You should know the types and forms of companies and firms through which a business can be started in the Kingdom.
There are 5 forms of companies for both local and foreign businesses available in Saudi Arabia, for example:
1. Limited Liability Company (LLC)
Limited Liability Company (LLC) is the most common type of company in Saudi Arabia. It provides minimum liability for owner’s against company debt. This type of company is not permitted to have more than 50 shareholders.
2. Joint Stock Company (JSC)
Joint Stock Company (JSC) in Saudi Arabia consists of capital that is divided into shares of equal value. The Ministry of Investment of Saudi Arabia (MISA) generally requires foreign JSCs to have a minimum of SAR 500,000 share capital. While in most of the cases, this does not need to be paid down, or deposited in a local bank. But it should appear on the balance sheet of the business and can be used as working capital.
3. Single Member Limited Liability Company (SMLLC)
Single Member Limited Liability Company (SMLLC) is a company which has limited liability by only its single owner. It has a single owner who owns all the shares of the company. There are many benefits of owning the SMLLC and the owner can’t own more than one such company.
4. Limited Liability Partnership (LLP) Company
The LLP is a partnership company in Saudi Arabia in which some or all the partners have limited liability with elements of partnerships and corporations.
5. Special Business Forms for Foreign Companies
In addition to the above forms of companies, there is another category of company, called as special business forms which are available to foreign companies. A foreign company can do business in Saudi Arabia through these forms such as.
- Joint Ventures with a Saudi company
- By opening a branch office (BO) in Saudi Arabia
- Representative office (RO) in Saudi Arabia
- Agency agreement (AA) in Saudi Arabia
We have discussed the types of companies, let’s know when to own your company in KSA below.
When to Own Your Company in KSA
Present scenario is the right time to own your company in KSA because of many factors which are:
- The Saudi Government has liberalized the economic policy of the country for foreign trade.
- It has opened the door for foreign direct investment (FDI) in diverse business areas.
- Government has eased the company registration process.
- It has allowed the foreign company to invest in the areas of their working with 100% share holding.
- Foreign companies can start their businesses with multiple options or many ways such as joining a Saudi company as a joint venture or by opening a branch office or a representative office in KSA or by agency agreement.
- The Saudi Government has launched National Vision 2030 to uplift the country’s economic power.
Therefore, this is the time for all international business communities to own your company in KSA.
How to Own Your Company in KSA
To make the company’s setup process in KSA easier and more convenient, the Saudi government is relentlessly pursuing its privatization initiatives under its Policy Reforms processes. To own your company in KSA you have to go through various processes of company registration in Saudi Arabia, like:
1. Planning and Strategy Before Company Incorporation in KSA
You should plan and make a strategy before company registration in Saudi Arabia. During planning you have to decide about business type, paid-up capital, and license requirements in the field of your business choice. During this phase you have to consider the following items:
- The name of Company or business firm.
- The Type of company or your business entity – LLC, JSC, Branch Offices or other types
- Company organizing documents like Business License, Certificate of Incorporation, Board Resolution, Power of Attorneys, etc.
2. Process of Company Incorporation in Saudi Arabia
Once you have planned and reviewed everything about the company registration in Saudi Arabia, you can start with the following steps to own your company in KSA. The company incorporation process are:
(i) Application for Investment License in Saudi Arabia
All Non- Gulf Cooperation Council (GCC) foreign investors need to apply to the Ministry of Investment of Saudi Arabia (MISA) i.e. previously Saudi Arabian General Investment Authority (SAGIA). The MISA application form should be filled in by giving the nature and size of the investment activity with key financial information on the company’s operation. The MISA will scrutinize and then issue a pre-approved certificate confirming the company’s registration with 100% foreign ownership, as appropriate.
(ii) Articles of Association for Company Registration in KSA
You need to submit the Articles of Association (AOA) to the Ministry of Commerce and Investment (MCI) in KSA. Once it is approved by MCI, the document needs to be notarized to register for Commercial Registration certification and Tax Number along with subsequent publication of Articles of Association with a company name in the Saudi newspaper.
(iii) Registration of Company Name in KSA
The trade name for company incorporation in Saudi Arabia must be approved by the Unified Centre through the Ministry of Commerce and Industry (MCI) before submitting incorporation forms, articles of association and the deed of establishment.
(iv) MISA Foreign Business Investment License to Own Your Company in KSA
After submitting successfully all required documents like the commercial registration certificate, Tax Registration (TR), Municipality License, and Bank’s Share Capital deposit letter and approval, Ministry of Investment of Saudi Arabia (MISA) issues foreign business investment license and allows the company to sign contracts, issue invoices and hire employees in KSA.
(v) MERAS Registration to Own Your Company in KSA
MERAS registration is a government program in Saudi Arabia especially for foreign company registration to be managed by the Saudi Business Centre. It allows procedures and services for business operations to speed up the company formation process. Under this program a company can register with a municipality under Municipal Employee Relation Acts (MERAS) which needs a physical office for registration. All types of registrations have to be submitted to the Ministry of Commerce and Industry (MOCI) in Saudi Arabia.
The Certificate of Registration (CR) for a company is generally issued in 6 weeks and then the company fulfills the tax registration process. Under MERAS program, a company can notarize the Articles of Association (AOA) online, register with the Ministry of Labor and Social Development (MLSD), the General Organization for Social Insurance (GOSI) and the General Authority of Zakat and Tax (GAZT) along with registration with Wasel.
(vi) Creating Company Seal for Businesses in KSA
Company seal is required in fulfilling business formalities such as Government documents, Official letters, contractual agreements, shareholders, management resolutions, and notices. The company seal must bear the Certificate of Registration (CR) number and Company name.
(vii) Company Registration at Chamber of Commerce in KSA
All business firms seeking company registration in Saudi Arabia need to submit the CR to the Chamber of Commerce and Industries (CCI) for the certificate of its membership within 30 days of issuing the Certificate of Registration (CR) by the MCI.
(viii) Company’s Bank Account Opening in Saudi Arabia
Every company needs to open a local bank account within 90 days of issuance of the Certificate of Registration (CR).
You are welcome to contact F. Al Tamimi professional and experienced company registration legal consultants for all types of company formation in KSA.
Legal Requirements for Company Formation in Saudi Arabia
Tax System in Saudi Arabia
- Employees are exempted from personal income tax however, companies are taxed based on the types of company.
- All registered companies in KSA come under the jurisdiction of corporate tax.
- Tax is imposed on the basis of net profits.
- Non- Saudi and non-GCC nationals’ earnings are taxed from interest.
- The Saudi and GCC nationals have to pay a 2.5% Zakat tax.
Business Activities are Allowed for Foreign Investors
Foreign investors are allowed 100% sharing holding in the service sector. Foreigners are restricted for 100% FDI in:
- Printing and publication business
- Defence and military equipment.
- Real estate investment in Medinah and Makkah
- Investigation agencies or security services
Minimum Paid Up Capital to Own Your Company in KSA
The minimum paid-up capital requirements for company registration are:
- SAR 30 million for 100% FDI with a commitment for at least SAR 200 million investment in the first 5 years.
- SAR 7 million with a minimum SAR 20 million contribution from the foreign investor having a 25% of Saudi partner.
- SAR 30 million for Service & Property Investment, Real Estate.
- Trading SAR 20 million for trading.
- SAR 500, 000 for Service Transport.
- SAR 25 million for Agriculture.
- SAR 500,000 for Contracting.
You can contact F. Al Tamimi investment advisors in Saudi Arabia for all types of investment services in Saudi Arabia on competitive service charges available in Saudi legal markets.