Understanding the business setup costs in Saudi Arabia can help companies budget more effectively, avoid any potential financial pitfalls and seamlessly enter the market.
This article explores the cost components involved in registering a foreign company in Saudi Arabia and provides a complete overview of the process.
Breakdown of Business Setup Costs in Saudi Arabia
Depending on the industry and operational scope, business setup expenses for the first year are around SR550,000 or $172,000. This encompasses incorporation fees, recruitment, office spaces, compliance and renewals, and third-party services.
Below is a detailed explanation of common business expansion costs.
Incorporation Costs
This pertains to the entire setup procedure for a business via a service provider, with the total cost estimated to be SR150,000 or $40,000.
Hiring Costs
Hiring in Saudi Arabia refers to the total costs of hiring a general manager (GM) and Saudi nationals—the latter step must be finalized within six or 12 months following the incorporation.
In Saudi Arabia, the monthly salary for a GM ranges from SR20,000 to SR25,000, while the average monthly salary for Saudi nationals typically falls between SR5,000 and SR8,000.
In some cases, a Saudi national’s salary can be as high as SR12,000.
Workspace Costs
The average cost of hiring a GM and one Saudi national is SR375,000 or $100,000.
Workspaces the costs of securing an office space. Typically, the most economical shared workspaces cost SR20,000 or $5000.
Compliance and Renewal Costs
This stipulation encompasses the timely renewal of all necessary government licenses and maintaining updated company records on all government portals.
The total cost can reach SR75,000 or $20,000
NOTE: The process for renewing a license for the upcoming year begins in the 11th month of the current year. Therefore, it is essential to include this in the financial planning for the first year.
Hiring Third-party Services Costs
Costs for third-party services refer to the total costs of outsourcing third-party services for payroll management, accounting, audit, and PRO services, which can typically reach SR25,000 or $6,900.
Taxation Costs
The amount of taxes constitutes a direct running cost of a business. Common tax expenses that a foreign business incurs in Saudi Arabia include:
1. Value-added tax (VAT), which currently stands at 15%
2. Corporate income, also referred to as “capital gains,” is levied on net adjusted profit, or the share of companies owned by non-Saudis, at a rate of 20%.
3. Withholding Taxes (WHT), which range from 5% to 20%, depending on the nature of the business activity.
Common Mistakes to Avoid While Budgeting for the Saudi Market
Proactively addressing common challenges can help businesses avoid operational delays and financial setbacks, ensuring a smoother setup process in Saudi Arabia.
- Incomplete licensing procedures can lead to significant delays and extra fees.
Staying on top of business setup requirements is imperative to avoid fiscal penalties and operational lapses.
For example, the GM of the newly formed Saudi entity is required to get their Iqama in person after securing a visa. To be able to open a bank account, the GM must obtain their Iqama beforehand.
Failure to have an active bank account significantly impacts the company’s financial performance.
- Delay in renewal processes leads to a resubmission and additional costs.
It is the business’s responsibility to renew essential documents such as MISA license and commercial registration.
It is advisable to maintain a proactive approach toward license renewal and initiate the processes ahead of time to ensure compliance and avoid hefty fines.
- Improper Handling of Ongoing Compliance Requirements leads to weakened business development performance.
It is important to be mindful that remaining in compliance is vital for business continuity. Government systems are highly interconnected, and one mistake in one area can trigger a chain reaction that impacts essential business operations in several other areas.
Nonadherence to key post-setup compliance areas can result in significant penalties that inflate costs. Among these requirements are full adherence to the Saudization quota and maintaining proper records on governmental platforms.
FAQs about Business Setup Costs in Saudi Arabia – 2025
- What are the additional costs associated with company compliance?
Ongoing expenses encompass portal management, employee onboarding, tax filing, and renewal procedures of foundational documents such as CR and MISA licenses.
Factors influencing company incorporation fees might include the business form you choose for your Saudi entity, whether it is a subsidiary or branch.
- What documents are required for business setup incorporation in Saudi?
Here’s the list of incorporation documents required to jumpstart the company setup process.
For Startups:
- Commercial Registration (Attested by MOFA and the Saudi Embassy)
- Memorandum of Association (MoA) & Articles of Association (Attested by MOFA and the Saudi Embassy)
- A letter of intent, a startup brief, and a pitch deck
- A support letter from a VC company or a licensed incubator
For Established Businesses:
- Commercial Registration (Attested by MOFA and the Saudi Embassy)
- Memorandum of Association (MoA) & Articles of Association (Attested by MOFA and the Saudi Embassy)
- An Audited Financial Statement