Starting a Foreign Business in Saudi Arabia: Understanding the 3-Stage Expansion Roadmap

As of late 2025, Saudi Arabia hosts over 780 regional headquarters (RHQs) of international companies. With 100% foreign ownership now permitted in key strategic industries, establishing a business in Saudi Arabia has become an increasingly attractive option for international investors.

Saudi Arabia stands among the world’s fastest-growing economies, with a projected growth rate of 4.5% in 2026 – far outpacing the global growth average of 3.4%. It’s no surprise that global giants like Google, Morgan Stanley, IBM, and many others have established a strong presence in the Kingdom.

This guide outlines the essential steps to establish a foreign-owned business in KSA and provides an overview of the main compliance requirements that international companies need to know.

What’s Changed in 2025?

Labor Law Amendments

Saudi introduced several important updates to its employment framework in 2025, reinforcing its focus on transparency, fairness, and merit-based labor practices. Among the most significant changes is the requirement for employers to clearly specify salary payment dates in all contracts registered on Qiwa. Employees are now entitled to submit wage claims directly through Qiwa within 30 days of a missed payment.

Employment contracts must also now clearly distinguish between base salary and allowances—such as housing, transportation, and telecommunications—bringing Saudi labor practices closer in line with those of the UAE and other GCC markets.

Resignation procedures were also revised under the amended Labor Law announced earlier in the year. Under the new rules, resignations are automatically deemed accepted if an employer does not respond within 30 days.

Employers may extend this period to a maximum of 60 days, but only with written justification. Employees are also granted the right to withdraw their resignation within seven days, provided it has not yet been accepted.

Family-focused benefits saw notable expansion. Maternity leave increased from 10 to 12 weeks, paternity leave now allows fathers to take three days within the first seven days following childbirth, and bereavement leave grants three days for the death of an immediate family member.

GOSI Contributions and Social Insurance Reform

Amendments to the Social Insurance Law, issued in 2024 and effective from July 2025, introduced a new retirement framework for new entrants to the workforce while revising provisions for existing contributors.

Under the updated system, the statutory retirement age now ranges from 58 to 65, depending on the contributor’s age as of July 3, 2024. For individuals enrolled under the new scheme, the standard retirement age is set at 65. Early retirement remains available up to 10 years earlier, subject to the completion of 360 months (30 years) of contributions.

The reforms also gradually increased the contribution period required for early retirement from 25 to 30 years.

In parallel, both employee and employer contribution rates are set to rise incrementally from 9% to 11% of contributory wages, increasing by 0.5% annually from July 2025 through 2028.

Saudization Expansion: From Broad Quotas to Targeted Mandates

From October 2025, Saudization requirements were significantly expanded across several professional categories, particularly within healthcare (including pharmacy and dentistry), financial services (accounting), and engineering.

Additional localization initiatives were introduced in the sports and fitness sector. Effective November 18, 2026, establishments employing four or more staff will be required to localize 15% of designated roles across 12 job categories within men’s and women’s sports centers and gyms. These roles include sports coach, professional football coach, personal trainer, athletics coach, and sports supervisor.

For foreign companies entering the Saudi market, Saudization strategy must be integrated into the establishment phase rather than addressed post-launch.

Looking ahead to 2026, businesses should anticipate further expansion of role-specific quotas, stricter enforcement, and a growing need to invest in compliance frameworks and training programs for Saudi nationals.

Requirements for Company Formation in Saudi Arabia

1. Laying the Groundwork: Legal Entity Establishment (Projected timeline: 1 month)

The initial phase of setting up a business in Saudi Arabia involves establishing a legal entity.

This entails obtaining a one-year investor license from the Ministry of Investment of Saudi Arabia (MISA), reserving a company name, drafting and notarizing the Articles of Association (AoA), securing a Commercial Registration (CR) certificate, and registering with the Chamber of Commerce (CoC).

1. Obtain a MISA Investor License
2. Name Reservation
3. Draft Local Articles of Association (AoA) – the document is established by the law and companies can only adjust their general manager’s powers
4. Secure Commercial Registration (CR)
5. Obtain the Chamber of Commerce (CoC) Registration

2. Assembling a Team: Authorization and Hiring (Projected Timeline: 2 months)

After procuring a company seal, the next step is to get the authorization to hire staff.

This phase requires registering with the Ministry of Labor (MoL), enrolling in the General Organization for Social Insurance (GOSI), registering a national address, securing a visa for a general manager, and registering with the General Authority of Zakat and Tax (GAZT) for tax compliance, including VAT

6. Obtain a company seal
7. Register with the Ministry of Labor
8. Register with the General Organization for Social Issuance (GOSI)
9. Register a National Address
10. Issue a GM Visa
11. Registration with the General Authority of Zakat and Tax (ZATCA) and VAT Registration

3. Finalizing the Setup Process: Residency and Banking (Projected timeline: 3 months)

Continuing on the steps, the final stage involves completing the residency process for the general manager and opening a corporate bank account.

This includes activating the Chamber of Commerce account, obtaining health insurance, scheduling a medical checkup, securing an Iqama (residence permit), registering on various government portals (Muqeem, Absher, Qiwa, Mudad), and opening a bank account.

12. Activate the Chamber of Commerce (CoC) account.
13. Obtain Health Insurance
14. Get a Medical Check-up
15. Issuing the GM’s Iqama
16. Register with the Muqeem portal for streamlined visa and residency management.
17. Register with the Absher portal for an array of e-government services.
18. Register with the Qiwa portal for business services designed for SMEs.
19. Register with the Mudad Portal to manage essential municipal services for your company.
20. Open a bank account

What Documents Do Foreigners Need to Incorporate a Business in Saudi Arabia?

The following is a complete and practical breakdown of the documents foreigners need to incorporate a business in Saudi Arabia

For Established Businesses (should typically have at least 1–2 years of operating history in their home country)

• Commercial Registration (CR)
• Memorandum of Association (MoA)
• Articles of Association (AoA)
• Audited financial statements (often required for the past 1-2 years)

For Startups

• Commercial Registration (CR)
• Memorandum of Association (MoA)
• Articles of Association (AoA)
• A letter of intent, a startup brief, and a pitch deck
• A support letter from a VC or a licensed incubator

Core Regulatory Compliance Obligations

Foreign businesses establishing operations in the Kingdom need to navigate several critical compliance procedures following the incorporation of their Saudi entity.

Nitaqat (Saudization)

Saudi labor regulations require organizations to hire Saudi nationals based on a quota system that differs based on the business's size and sector. Meeting these requirements is mandatory for securing the Saudization certificate, which companies must obtain to participate in government tenders. Non-compliance can result in Red Zone classification, triggering operational limitations and potential legal consequences.

Ongoing Management of Government Portals

Foreign entities operating in Saudi Arabia must maintain current and precise information across key government portals, including Muqeem, Qiwa, and Mudad. These platforms are interconnected, meaning compliance failures on one system can create cascading operational challenges.

Example: Delayed submission of Zakat or VAT payments may lead to Muqeem suspension, preventing companies from processing exit-reentry permits for foreign employees.

Tax Filing With ZATCA

Every entity must submit annual tax filings to the Zakat, Tax, and Customs Authority (ZATCA) with complete accuracy and within deadlines to maintain regulatory standing. Saudi Arabia's tax framework includes a 15% VAT rate, 20% corporate tax for non-Saudi entities, and withholding taxes ranging from 5% to 20%.

License Renewal Management

Companies must monitor and complete mandatory license renewals and annual confirmations, including essential documentation like the General Manager's Iqama, commercial registration (CR), and MISA license. Many businesses engage regulatory compliance consulting services in Saudi Arabia to oversee and coordinate these renewals, preventing operational interruptions.

Additional Compliance Considerations for Foreign-Owned Entities

Appoint a Saudi-Resident General Manager (GM)

Your company must designate a general manager who holds a Saudi Iqama. The GM must personally appear in Saudi Arabia to sign the required documentation to obtain an Iqama and finalize the business establishment procedures.

Obtain a Registered Business Address

All companies in Saudi Arabia are legally required to have a registered office address to acquire a National Address, an essential prerequisite for formally establishing a foreign business entity.

Establish a Corporate Bank Account

With the GM's Iqama, foreign companies can open a corporate banking account with a Saudi institution, representing the final milestone in the three-phase business establishment process in Saudi Arabia.

Key Challenges Facing Companies Expanding to Saudi Arabia

Understanding Local Regulatory Frameworks

Saudi Arabia is steadily marching toward becoming one of the top 15 global economies by 2030. To meet this objective, the government is constantly updating its regulations and introducing new reforms to nurture a pro-business environment and make it conducive to foreign capital. Keeping pace with these frequently changing regulations presents a considerable challenge for international businesses.

Mastering Business Setup Processes

Establishing a presence in Saudi Arabia requires a deep commitment to compliance at every stage, from licensing and hiring all the way through to banking and beyond. As the Kingdom’s business environment becomes more competitive, these regulatory requirements have become a primary differentiator for success.

Cultivating a Robust Professional Network

For international business entrants, developing strong business relationships should be a strategic priority and can be nurtured through C-suite gatherings, private executive dinners, and matchmaking sessions, including those facilitated by AstroLabs.

The AstroLabs Network boasts over 10,000 members—professionals spanning both private and public sectors—providing a gateway for businesses to connect with prospective clients, collaborators, and vendors, enabling your business to grow and seamlessly integrate into the Kingdom's economic and cultural landscape.

Why Engage a Local Corporate Advisory?

Engaging a local, on-the-ground expert expedites market entry and facilitates access to the valuable insights, resources, and robust industry networks necessary to stay ahead in Saudi Arabia's fast-growing economy.

A reputable business setup and corporate services partner ensures:

• Seamless Market Entry: Manage the entire company incorporation process with proactive support to eliminate errors before they occur.
• Market Expertise: Leverage deep market intelligence, local talent pools, and established networks to embed your brand and tap into opportunities faster.
• Compliance Management: Expertly manage essential government portals, visa processing, license renewals, and tax obligations—mitigating risk and avoiding costly penalties.
• Specialized, On-Demand Support: Access real-time insights that allow your business to act quickly in response to regulatory shifts and emerging market demands.

Over the last 11 years, AstroLabs has enabled 850+ high-growth companies from 50+ countries and 37 sectors to enter the Kingdom, with our PRO, GRO, and HR services increasingly playing a key role in their success.

Foreign Company Registration in Saudi Arabia: Answers to FAQs

How long does it take to start a business in Saudi?

Once all the necessary documents are ready, it takes around 6 months to have a fully operational business in Saudi.

Our team expedites the process significantly (on average, AstroLabs clients become operational in 3 months), thanks to their decade-long expertise in company formation in Saudi Arabia and strong connections with key partners, including MISA, along with various private sector entities and local banks.

Can foreigners set up a company in Saudi?

Yes, foreigners can set up their company with 100% ownership. As one of the fastest-growing economies in the world, Saudi offers the optimal launch for foreign businesses due to its pro-enterprise environment, tax benefits, and ease of the process of establishing a business.

Which activities allow 100% foreign ownership in Saudi under a MISA business license versus those that generally require a Saudi partner?

Activities / Licenses That Typically Permit 100% Foreign Ownership

These categories generally allow full foreign ownership without a Saudi partner, subject to the specific license requirements:

1. Service License

The license covers service-oriented businesses such as restaurants, marketing, and IT or app services, permitting 100% foreign ownership provided the company has been established outside Saudi Arabia for over one year and meets the minimum capital requirements.

2. Industrial License

The license applies to manufacturing and industrial activities, allowing 100% foreign ownership, provided the company has been established abroad for at least one year.

3. Agricultural License

The license covers farming and agricultural operations, with 100% foreign ownership permitted subject to standard establishment conditions

4. Mining License

The license allows foreign companies to engage in mining, provided the company has been established abroad for at least one year, with 100% foreign ownership permitted under standard requirements.

5. Trading (Commercial) License – 100% Option

Enables import/export and trading operations.

Full foreign ownership is possible if the company has:

• presence in three overseas markets,
• SAR 30 million invested in year one,
• SAR 170 million invested in the Saudi entity over five years.

6. Professional License – Conditional 100%

Professional activities such as specialized engineering firms can be 100% foreign-owned if they meet additional experience and global presence requirements (e.g., four international branches, SAR 10 million capital per branch, and 7+ years’ experience)

Activities / Licenses That Typically Require a Saudi Partner or Local Participation

Certain business types or license paths still require local participation or a partner:

1. Professional License (Standard Route)

Most professional service firms require a minimum 25 % local partner as part of the license conditions.

2. Trading License – Saudi Partner Route

Instead of meeting the 100% ownership thresholds, companies can instead operate with a Saudi partner owning 25%, which has lower capital requirements and no international branch history requirement.

The company must inject SAR 26.67 million in capital during the first year, with foreign shareholding of at least SAR 20 million, and there is no requirement to invest SAR 170 million over five years.

How many shareholders are required to set up a business in Saudi?

To start your business in Saudi, you will need at least one shareholder to do so. The shareholder can be a Saudi resident or a foreigner.

What is the average cost of setting up a business in Saudi?

The average cost of expenses covering the business setup during its first year of operation can be SR 550,000 ($146,700). The renewal process for a license covering the following year starts in the 11th month of the year, meaning that it is vital to ascertain this in the budget for the first year.

Why do I open a corporate bank account in Saudi?

Opening a bank account is an essential step towards forming a business in Saudi. AstroLabs’ team can help foreign businesses unlock direct access to leading banks such as SAB, and other banks in the Kingdom, including Riyad Bank and Albilad Bank, allowing companies to jump-start operations.

Do foreign companies pay VAT in Saudi Arabia?

VAT registration is mandatory for businesses with a value of supplies > SAR 375,000. Income Tax & Zakat: Foreign companies are subject to a corporate income tax of 20% on the net adjusted profits at the end of the financial year.

Do expats pay tax in Saudi Arabia?

While there is no personal income tax, non-Saudi and non-GCC residents who engage in business activities within Saudi Arabia are subject to a corporate tax rate of 20% on their net adjusted profits. This tax applies to non-Saudi and non-GCC individuals who hold shares in resident companies.