As Saudi Arabia continues to move towards its Vision 2030 diversification goals, it's taking a proactive approach to attracting investment from around the world. One major step in that process is the ability for foreign companies to open and manage their own operations in the kingdom without a Saudi partner.

Driving this initiative is the Ministry of Investment of Saudi Arabia (MISA), which has opened up a wide range of sectors to 100% foreign ownership. This not only gives companies more control over their operations in the kingdom, but also allows them to take advantage of one of the fastest growing markets in the Middle East with streamlined processes and direct oversight.

How to Set Up in Saudi with Full Ownership

1. Obtain a MISA Licence

The first step in setting up a fully foreign-owned company in Saudi Arabia is to obtain a licence from the Ministry of Investment of Saudi Arabia (MISA). This licence not only allows you to legally operate in the kingdom, but it also serves as proof that your business is compliant with Saudi regulations. To apply, you'll need to provide a range of documentation, including:

• A detailed business plan.
• Memorandum and articles of association.
• Certificate of incorporation.
• Details on capital structure and shareholding.
• Information on the manager or executive director of the company.
• Proof of residence in Saudi Arabia (for the manager or executive director).
• Certificate of registration from your home country.
• Financial statements.
• Passports for shareholders.
• Articles of Association.

It can take around 30 working days to process a MISA licence, so it's important to plan ahead.

2. Select the Right Business Setup

You'll also need to decide on a business structure that complies with Saudi regulations and meets your overall goals. Your options are:

• Limited Liability Company (LLC): This is the most popular setup for fully foreign-owned businesses. It offers greater flexibility than other business structure while fully protecting personal assets.
• Branch Office: A good choice if you want to expand your existing business to Saudi Arabia without creating a completely new entity. This setup allows your company to operate under the same legal identity as the parent company, making it easier to manage and maintain consistency in operations.
• Joint Ventures: A good option if you need to partner with a local partner and want to operate a heavy industry.

Each setup has its advantages, so it's important to choose the one that best fits your business needs.

3. Register with the Ministry of Commerce

Once you've decided on a structure, you'll need to register for Commercial Registration (CR) through the Ministry of Commerce. You'll also need to register with the Chamber of Commerce.

Your Articles of Association are critical to this process, as they outline your company's objects, structure, and management. This documentation is important for several reasons: It ensures your business is operating in a transparent and above-board manner, which is required by Saudi law. It also helps you avoid any potential issues with foreign ownership and ensures you're in compliance with regulations on sectors restricted to Saudi nationals.

4. Open a Corporate Bank Account

You'll need a Saudi corporate bank account to manage payroll, expenses and other financial obligations. To set one up, you'll need to provide:

• A valid MISA licence.
• Commercial Registration.
• Supporting documents, such as shareholder information and identification.
• Additional paperwork, depending on your bank.

This is important for tax purposes and to ensure you're in compliance with Saudi banking regulations.

5. Understand tax and labour laws

It's important to understand Saudi Arabia's tax and labour laws to comply with regulations and manage your business effectively:

• Corporate Tax: Fully foreign-owned businesses are taxed at 20% of corporate income.
• Value Added Tax (VAT): Saudi VAT is 15% and applies to most goods and services.
• Labour Law: Employees are entitled to 15 days' pay for every year worked, and women are prohibited from working in certain industries.
• Saudisation (Nitaqat): You'll need to comply with this policy, which requires employing a certain percentage of Saudi nationals based on your company's size and industry.

Important Considerations for Foreign Investors

Saudi Arabia is an exciting market for foreign investors, but it's important to understand several key factors before setting up operations. By addressing these considerations first, you'll be better equipped to navigate regulations and maximise your business success.

Location: This is critical to your business success. Saudi’s cities offer unique advantages based on their economic and logistical offerings. The capital, Riyadh, for example, is home to government agencies and large corporations, making it a prime location for businesses that need to be close to regulatory bodies and major partners. Jeddah, a key port city on the Red Sea, is an attractive option for logistics, trade and tourism. While, Dammam, located in the oil-rich Eastern Province, is a strategic location for energy, manufacturing and industrial projects.

Industry-specific licences and permits: Despite the Kingdom’s new simplified licensing process, many industries still require additional approvals. Sectors like healthcare, construction and education are highly regulated to ensure high standards and public safety. Healthcare providers, for example, need to obtain approvals from the Ministry of Health, while construction companies must secure permits from the Saudi Contractors Authority. Educational institutions must follow guidelines set by the Ministry of Education. Knowing what these requirements are and preparing documentation in advance can help minimise delays and ensure compliance.

Post-launch obligations: Setting up a business in Saudi Arabia is just the first step; compliance with local regulations is an ongoing responsibility. You'll need to file taxes regularly, including the 20% corporate tax and 15% VAT. You'll also need to comply with the Saudisation policy, also known as Nitaqat, which requires employers to meet certain quotas for hiring Saudi nationals. Failure to comply with labour laws or tax regulations can result in fines and operational disruptions, so seeking the help of professional advisory services is advisable.

How can Sovereign Group help?

Sovereign group has extensive experience in the Saudi Arabian market and strong relationships with government entities, including MISA and the Ministry of Commerce. We can simplify the process of establishing a fully foreign-owned company in Saudi Arabia, handling every aspect from obtaining the MISA licence to securing industry-specific permits, tax registration, and labour approvals. If you need assistance with setting up a business in Saudi Arabia or any related company setup, restructuring, or PRO services across the UAE, Oman, Qatar, or KSA, please contact us at +971 (0)4 456 1761 for Dubai, +971 (0)2 448 5120 for Abu Dhabi, email us at ksa@sovereigngroup.com, or complete the contact form below. We would be delighted to assist you.