A successful company formation in Saudi Arabia requires a few key steps to be implemented. This includes choosing the right entity for your business, registering with the appropriate business licenses available, and other key factors.
This guide entails a step-by-step guide on expanding your business to Saudi Arabia and what it takes for a complete company formation in the Kingdom.
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Choosing the Right Entity for Your Saudi Business
Selecting the proper structure for the Saudi entity is a critical decision impacting various facets of the business, including growth potential, paperwork requirements, capital capacity, staffing, and taxation.
Here are the main business structures in Saudi Arabia:
- Subsidiary of a Foreign Company
- Limited Liability Company (LLC)
- Joint Stock Company (JSC)
- Regional Headquarters (RHQ)
- Technical and Scientific Services Office (TSSO)
Business Licenses Available For Established Foreign Companies in Saudi
If you’re an existing foreign company looking to expand into Saudi Arabia, you can choose from various licenses issued by MISA, including the following:
- Service license
- Industrial license
- Agricultural license
- Real estate license
- Trading license
- Mining license
- Professional license
- Scientific & Tech office
- Economic & Tech Liaison Office
TIP: Services, industrial, and agricultural investments qualify for 100% foreign ownership without conditions. Meanwhile, trading licenses require four international branches and a capital of SAR 10 million. Investments in real estate require 25% Saudi ownership.
Company Formation in Saudi Arabia for GCC-Owned Companies
Companies fully owned by Gulf Cooperation Council (GCC) nationals can establish a branch office or subsidiary to have a physical presence in Saudi.
TIP: GCC-owned subsidiaries can also merge multiple business activities on their licenses.
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.
TIP: To launch a new business in Saudi Arabia as an individual GCC national, you must present a certificate confirming that you are not a government employee, along with a police clearance.
Company Formation in Saudi Arabia Individual Foreign Entrepreneurs
Individual foreign entrepreneurs have specific pathways to establish businesses in Saudi. They must obtain a support letter from a government entity (such as MISA, PIF, CODE, KAUST, or TDF) or have a patented idea.
TIP: If you meet one of these requirements, you are eligible to establish a Limited Liability Company (LLC).
Company Formation in Saudi Arabia for Individual Foreign Entrepreneurs
The Saudi government offers an entrepreneurial license for startups. To qualify for an entrepreneurial license, the startup must have a minimum of five years of operations 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.)
- Acceptance by a Saudi-based incubator
Waagner Biro and Steel: Real-World Example of Successful Expansion into the Saudi Market
Saudi prominence as a fast-growing economy has reinforced its position as a vibrant business hub that’s a magnet for high-growth companies like Waagner Biro and Steel.
The Austrian firm, with a history spanning 165 years, provides engineering, design, and construction services for governmental and private sector entities.
The firm’s expansion into Saudi Arabia underscores the immense potential of the Saudi construction sector, forecast to be the biggest worldwide by 2028. Explaining the reasoning behind the market’s dynamism, Jason Wilson, general manager, noted that Saudi Arabia is a crucial tenant in the firm’s global strategy for the next 10 to 20 years.
Main catalysts include large-scale projects that are either in the execution or planning phase, described by Wilson as “out of this world.” The next decade promises even more growth opportunities as the Kingdom gears up to host large-scale events such as the 2034 FIFA World Cup and Riyadh Expo 2030.
The full breadth of lucrative, once-in-a-lifetime opportunities demonstrates the importance of establishing a robust, physical foothold in the Saudi market through a regional hub.
The strategic move creates new pathways for foreign companies to amplify their on-ground impact by staying closer to the pulse of innovation and the progress of transformation in Saudi Arabia, enabling them to carve out a unique niche for themselves and achieve greater success.
“Everyone wants to win a contract before exploring Saudi Arabia, but having a local presence is key to winning contracts in the Kingdom. Getting into Saudi Arabia early is especially important when you are tendering, and part of the scoring is dependent on whether you have a license. Get in on the ground, and you will pre-qualify for projects because you have a license,” Wilson illustrated.
The company’s market entry has been greatly facilitated by AstroLabs’ on-ground team. Their hands-on support spanned various aspects, including securing a business address and registering for VAT, as well as managing PRO services as part of the AstroLabs post-setup service suite.
As a trusted partner for Waagner Biro and Steel, AstroLabs has played a crucial role in the firm’s growth trajectory, marked by an unwavering commitment to shaping the future of the construction sector in Saudi.
Company Formation In Saudi Arabia – Answers to FAQs
- What is the KSA company formation process for foreigners?
The company formation process in Saudi Arabia for foreigners includes selecting a business structure (LLC, JSC, RHQ, etc.), obtaining a MISA license (like service, industrial, or trading), registering with the Ministry of Commerce, and complying with GOSI, tax, and Saudization requirements
- What are the most popular business forms in Saudi?
When establishing a new company, whether it’s a branch office or a new subsidiary, it’s crucial to take into account the requirements and characteristics of each entity type.
For foreign businesses entering Saudi Arabia, opting for a business structure aligned with the desired scale plays a pivotal role in defining the business growth trajectory, given its direct impact on several compliance areas, such as activation and taxation.
- What are the requirements for company formation in Saudi Arabia?
To set up a business in Saudi Arabia, here are the requirements:
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