Do you want to start a business in Saudi Arabia as a foreigner? ? here is a complete guide along with the legal requirements to start a profitable business in Saudi Arabia without money.
Well, by providing an in-depth analysis of the 50 Best Small Business Opportunities in Saudi Arabia and a series of industry-specific business plan templates; Now we will analyze in detail the legal requirements, the feasibility of the market and all that is needed to start a business in Saudi Arabia. So put on your entrepreneur hat and let’s move on.
Why start a business in Saudi Arabia?
Statistics show that Saudi Arabia is among the top twenty economies in the world and therefore part of the G20. Saudi Arabia has the largest economy in the Arab world.
Saudi Arabia’s economy is dependent on oil as the country has the second largest proven oil reserve and is also the largest oil exporter in the world. It also has the fifth largest proven natural gas reserve and is considered an energy superpower. Saudi Arabia, with a total value of US $ 34.4 trillion, is the second most important natural resource in the world. Style
Saudi Arabia is ranked 92nd out of 200 economies in the world in terms of ease of doing business according to the World Bank ranking, but that doesn’t mean the country is not investor-friendly. In 2016, the Saudi government announced its vision for Saudi Arabia by 2030 to reduce the country’s dependence on oil and diversify its economic resources.
The authorities are encouraging entrepreneurs to set up their own businesses in Saudi Arabia. Exports and manufacturing generally receive significant government support, especially with regard to the acquisition of land on which to build a factory.
If you open such a business in a free trade zone, of which there are several in the region, it is exempt from import and export duties, trade taxes, construction license fees and property. , property tax and restrictions. for the transfer of capital invested in the area.
If you want to start a business in Saudi Arabia, you need to be prepared to abide by the country’s very strict rules and regulations, especially if you are a foreign investor. Here are the steps to follow if you want to start your business in Saudi Arabia;
Starting a profitable business in Saudi Arabia as a foreigner. The Complete Guide
First step: choose the sector and the type of business you want to create
The first step if you want to start a business in Saudi Arabia is to choose the industry and the type of business you want to operate.
When choosing the sector and type of business you want to open in Saudi Arabia, you should take into account that there are restrictions on what activities a foreigner can establish in the country, and it depends on your nationality. . – the headquarters of the parent company, if you are planning to set up a branch of the company, and the existence of existing commercial agreements or relationships.
For example, if you want to participate in sales and distribution for business purposes. agent, please note that you can only sell directly to the private sector from outside of Saudi Arabia and it is recommended that you hire an agent or distributor from Saudi Arabia.
Saudi law does not allow foreign companies to act as commission agents in any part of their country. Wholesale, retail and distribution is subject to a minimum foreign investment of SR 20 million with a 25% local partner involved.
Step two: choose a name for your business
The next step in starting a business in Saudi Arabia is choosing a name for your business. Before choosing a name for your business, you don’t need anything to go online and check the names of the biggest brands in the industry in which you are going to start your business in order to be properly guided when choosing your own name. .
Step three: understand company law in Saudi Arabia
Another important step to take if you want to start a business in Saudi Arabia is to make sure this is your study and understanding of the country’s corporate law. You might be interested to note that corporate law in Saudi Arabia is similar to what you get in western countries as businesses can be run as limited liability transactions, private companies, or other business.
You can actually get advice from your local chambers of commerce. They can really give you the start-up advice you need and assign lucrative newcomers to the area. A partnership with local chambers of commerce will provide you with support. You can contact your local Saudi Arabian Chamber of Commerce at one of the addresses below;
- Saudi Arabia Council of Chambers of Commerce and Industry, PO Box 16683, Riyadh 11474 Kingdom of Saudi Arabia (tel. 966-1-405 3200)
- Oriental Province Chamber of Commerce, PO Box 720, Dammam 31421, Kingdom of Saudi Arabia (tel. 966-3-857 1111)
- GCC Camera Federation, PO Box 2208, Dammam 3145, Kingdom of Saudi Arabia (tel. 966-3-826 5943)
- Jeddah Chamber of Commerce and Industry, PO Box 1264, Jeddah 21431, Kingdom of Saudi Arabia (tel. 966-2-651 5111)
- Riyadh Chamber of Commerce, PO Box 596, Riyadh 11421, Kingdom of Saudi Arabia (tel. 966-1-404 0044).
Fourth step: create a feasible business plan
In Saudi Arabia, you cannot register a new business in the country without submitting your business plan for verification. Additionally, running a successful business requires having an effective and achievable business plan.
A business plan is a template for running a successful business. Having a workable business plan will help you reduce the trial and error approach to doing business. You will be able to manage your business with determination and precision; you will know what to do at any given time and how to deal with challenges, growth and expansion.
Hence, if you want to start your own business in Saudi Arabia, you need to write a detailed business plan which can be true to life. test when exposed to it; you should be working with facts, figures, and other industry metrics in regards to where you are going to start your business.
Your business plan should state how you plan to run your business. The rule of thumb when writing a business plan is to try to be as realistic as possible and never overdo projects, relying on income and profit. In fact, when writing a business plan, it is safer to underestimate so as not to get discouraged when reality strikes.
Fifth step: partnership with a citizen or a local business
The law in Saudi Arabia does not allow a foreigner to start a business in Saudi Arabia without the participation of a citizen or local business on the board of directors of your new business. You are required by law to have a local partner who owns a controlling stake and therefore you can control the business to the point of terminating the business if they are not satisfied with any of the actions of the business.
The local partner will be The company or individual must not participate in the initial investment or participate in any financial plan. As with freelance work, there are several ways to reward a partner. The local partnership requirement is currently being revised in some states to attract and attract more foreign investors and investors interested in starting a business in Saudi Arabia.
An alternative to starting a new business in Saudi Arabia is to buy an existing business which is a simpler process as it does not include capital investment, obtaining sponsorship / partnership with a citizen or registration; all you have to do is accept the price and transfer ownership of the business.
Step Six: Choose a Business Form (Structure) for Your Business
Before choosing a business form, it is important that you consider the pros and cons of each of the business forms.It is interesting to note that in Saudi Arabia only three types of business forms are available for foreign companies.
Each of these business forms has unique advantages and disadvantages, and they are limited to working within a commercial enterprise. , registration requirements and minimum capital requirements. In most cases, these requirements depend on the degree of the company’s commitment to Saudi Arabia and the proposed business activity.
There are various business entities in Saudi Arabia;
- Limited Liability Company (LLC):
A limited liability company (LLC) is the most common type of company and form of investment. for foreign companies entering Saudi Arabia. The minimum capital investment required to create an LLC is 500,000 SR and must have between 2 and 50 shareholders and be managed and represented by one or more managers.
There is no board of directors, although shareholders often provide for a board and other governance arrangements in the memorandum of association.
However, if there are more than twenty partners, the company must create a “Board of Controllers”. A Saudi partner is not necessary as there are no legal restrictions on foreign ownership. The LLC must also have an auditor.
Please note that a limited liability company can engage in the full range of activities related to the company’s licensed facilities and carry out projects in both the public and private sectors. Most likely, he will be eligible for financing from the Saudi Industrial Development Fund at favorable rates. A limited liability company can also sponsor its employees for residency purposes.
Another form of business that can be registered in Saudi Arabia is a branch. Foreign companies can register a wholly foreign branch in Saudi Arabia, provided they apply and obtain the necessary approval and business license. A branch can carry on commercial activities under its license.
As in most countries, the parent company will take full responsibility for all activities carried out by the branch. Registering a branch follows the same general procedure as registering a branch, except that the articles of association are not subject to approval.
By law, the branch is allowed to develop and attract entrepreneurs throughout Saudi Arabia. The creation process is generally easier than for a company because there is no need to approve the articles of association and there are no reservation requirements.
Although the branch is not a locally registered legal entity, the branch of the foreign company in Saudi Arabia must deposit an amount equivalent to the capital required for the branches to the local bank. The amount is then blocked until a certificate of registration of the branch by the Ministry of Commerce and Industry is issued. Please note that for this you need to deposit a minimum capital of 500,000 SAR.
- Representation:
The law in Saudi Arabia has representations in the form of Technical and Scientific Departments (TSO) and Temporary Company Registration (TCR). TSOs are mainly liaison offices for a manufacturer who provides technical support in the local market through a distributor, while TCR is a short-term general contractor created under a specific government contract.
As a typical “representative office”, these forms are limited in their activities, especially for the promotion and attraction of businesses. TSO only serves as a liaison between the foreign company and the local market (and the distributor in Saudi Arabia), while the TCR may perform contract labor operations, but may not participate in any other promotion or additional general attraction of its activities. ……
Please note that in Saudi Arabia, the Technical and Scientific Office (TSO) cannot engage in business activities or generate income; instead, its activities are limited to providing technical information and assistance to the distributor and users with respect to the products, as well as marketing and technical research relating to the products. …
There is another option available to a foreigner who wants to start a business in Saudi Arabia, known as
- Outsourcing of recruitment via GEO’s employer registration service:
You can accept this business option if the company wants to quickly open an office in Saudi Arabia, or if the company wants to operate within a certain budget, or if the company wants to limit its initial obligations in Saudi Arabia, or if the company needs help with taxes on jobs, immigration and pay enforcement in Saudi Arabia.
Please note that if a company is considering recruiting staff in Saudi Arabia, they also need to decide if they will do the work in-house or use the World Employment Organization to handle the responsibilities of daddy of yroll and the official employer.
Step Seven: Register Your Company Name
Once you are able to correctly follow all of the above steps, it looks like you have a business in mind, then you can register your business name. Of course, you would do the necessary research for the name of the business to make sure that you don’t agree with a name that is already in their database.
If you don’t want anyone to register your business name, you need to register it quickly. When it comes to registration and licensing requirements, you should visit a state government office to begin the process.
Once your business name is successfully registered, you will receive a business number, registered company name, and other required business permits and licenses.
Once you have successfully registered your business, you need to show the Commerce Department that you have a substantial amount of money to invest in. The amount required varies from state to state (in most cases it ranges from $ 10,000 to $ 6,500 and $ 50,000 to $ 33,500) and is considered a guarantee even if you are authorized to withdraw money. when you need it.
Step Eight: Get the Business Insurance You Need
The rule of thumb for doing business in Saudi Arabia and most of the world is that you cannot do business without having some of the basic insurance policies required by the industry you want to work in. Therefore, it is important to budget for insurance and perhaps consult an insurance broker to help you choose the most suitable insurance policies for your business.
You may want to purchase some or all of these insurance policies for your business; General Insurance, Medical / Health Insurance, Third Party Liability Insurance, Workers’ Compensation, Overhead Disability Insurance, Group Business Owner Insurance, and Payment Protection Insurance.
Ninth step: rent or rent and ideal office location
Another important step to take when starting a business in Saudi Arabia is choosing the perfect location for your office. When it comes to renting office space in Saudi Arabia, the nature of the business you want to do should serve as a guide and you should seek advice on organizing zoning in that location.
Additionally, you will need a business license and submission authorization as part of the paperwork before the owner or real estate agent signs a rental agreement with your business.
Step ten: open the doors and start meeting clients
If you’ve passed Steps 1-9, you’ve really come a long way and it shows that you are truly up for business. You cannot generate sales from your products or services unless you open your doors to business. Basically, the last step when starting a business in Saudi Arabia is to give yourself access to the business. Start with renewed vigor to attract people to your area who are your primary target market.
In conclusion, it is important to clarify that this article only covers the main stages of starting a business in and in Saudi Arabia. other legal issues as well as accounting requirements such as setting up accounting procedures, obtaining acceptable software applications, obtaining necessary business or commercial licenses and notifying regional authorities, which are not covered here, but are also important procedures when it comes to starting a business in Saudi Arabia. Arabia.
We will advise you to consult a good lawyer even before starting the process of registering a new business in Saudi Arabia. An experienced lawyer will walk you through all of the intricacies of registration. This applies whether you are starting a small business or a conglomerate. Good luck when you start your business in Saudi Arabia.
