50 FAQs on Starting a Saudi Company

Q2: What types of business structures are available for foreign entrepreneurs?

A: There are a few common business structures for foreign entrepreneurs, including:

1️⃣ Limited Liability Company (LLC)

2️⃣ Branch of a Foreign Company

3️⃣ Joint Stock Company (JSC)

Each structure comes with its own set of requirements and advantages, so it’s important to choose the one that best suits your business goals.

Q3: Do I need a Saudi partner to start a business in Saudi Arabia?

A: Not necessarily! Many sectors in Saudi Arabia allow for 100% foreign ownership, especially when you apply for the Entrepreneur License under MISA.

Q4: What is the difference between an LLC and a Branch of a Foreign Company?

A: An LLC (Limited Liability Company) is a separate legal entity with its own liabilities, offering limited liability protection. A branch, on the other hand, operates as an extension of the parent company and must adhere to additional compliance requirements in Saudi Arabia.

Q5: Is 100% foreign ownership allowed in Saudi Arabia?

A: Yes, 100% foreign ownership is permitted in several sectors, especially under the Entrepreneur License and Foreign Investor Licenses provided by the Ministry of Investment.

Q6: How do I choose the right legal structure for my business in Saudi Arabia?

A: When selecting a legal structure, consider factors such as liability, control, industry restrictions, and future growth. For limited liability, an LLC is commonly preferred, while a branch is more suitable for businesses looking to expand their brand presence.

Q7: Are there any industries or sectors restricted to foreign investment?

A: Yes, certain sectors, such as oil exploration, military, and others, are reserved for local investment in Saudi Arabia.

Q8: What are the requirements for registering a branch of a foreign company?

A: Requirements include:

1️⃣ Last 1-Year Audited Financial Statement

2️⃣ Certificate of Incorporation

3️⃣ Memorandum of Association

4️⃣ Board Resolutions to Open the Branch

5️⃣ Power of Attorney for a Local Consultant

All above documents should be Apostille. For countries not part of the Hague Convention, documents need to be notarized, stamped by the Ministry of Foreign Affairs, and attested by the Saudi Embassy in the parent company’s country.

Q9: What is the process for reserving a trade name?

A: Currently, the trade name can only be reserved by a Saudi national. Your consultants on the ground will assist you in booking the name. The trade name should meet the following criteria:

• It must be in Arabic.
• It should have a meaningful interpretation in Arabic.
• It must not include country or city names.

In some cases, your consultants may also be able to reserve the same foreign company name for you.

Q10: What types of licenses are available for foreign-owned businesses?

A: The following are the key licenses available for foreign-owned businesses:

• Service License – for industries such as IT, tourism, restaurants, etc.
• Industrial License – for businesses like factories, workshops, etc.
• Trading/Commercial License – for businesses in import/export, retail, etc.

Each license has unique benefits and requirements.

Q11: Can I apply for an Entrepreneur License, and what are the requirements?

A: The Entrepreneur License is available for startups, whether or not they have a foreign parent company. To apply for this license, your startup must meet the following requirements:

• Obtain a recommendation letter from an approved incubator, accelerator, or venture capital (VC) firm recognized by the Ministry of Investment (MISA).
• Ensure that your startup aligns with the criteria set by MISA for innovative or scalable businesses.

Q12: Do I need separate licenses for each business activity?

A: Yes, if you operate in multiple industries, you will need separate licenses for each specific activity. For example:

• A service license will not cover trading or factory operations.
• Each activity may require its own set of licenses and approvals from the relevant authorities.

Q13: Is there a minimum capital requirement for foreign businesses?

A: Most businesses do not require a minimum capital requirement. Startups can begin with as little as SAR 5,000.

Q14: What taxes and fees are applicable to foreign-owned companies in Saudi Arabia?

A:

• Corporate Tax & Zakat: 20% corporate tax on adjusted annual profits.
• VAT: 15% on goods/services if the revenue exceeds SAR 375,000.
• Withholding Tax: Ranges between 5% and 20% for payments to foreign entities.

Q15: Can I open a bank account before my company is fully registered?

A: No, a CR and MISA license are required before opening a business bank account.

Q16: What documents are required for opening a bank account?

• 1️⃣ CR (Arabic & English)
• 2️⃣ MISA Digital License
• 3️⃣ Articles of Association (AOA)
• 4️⃣ Activities List (Arabic & English)
• 5️⃣ Company National Address
• 6️⃣ Owner’s/Partners’ Iqama ID
• 7️⃣ Owner’s/Partners’ Passport ID
• 8️⃣ Owner’s/Partners’ National Address
• 9️⃣ Company Stamp with CR Number (required by some banks)

Some banks allow you to open the bank account online. Read more from this article.

Q17: Are there any restrictions on transferring profits or funds abroad?

A: There are no significant restrictions, but tax obligations must be settled before transferring profits.

Q18: What are the costs associated with hiring employees in Saudi Arabia?

A: Costs involved in hiring employees include:

• Visa fees
• Medical insurance for employees
• Ministry of Labor fees (SAR 9,600 per expatriate)
• Salary packages for employees

Q19: What visas are available for foreign entrepreneurs and employees?

A: Available visa options include:

• General Manager (GM) Visa
• CEO/Chairman Visa for business owners
• Work visas for employees

Q20: How do I obtain a General Manager (GM) visa?

A: Once your MISA license and CR are in place, you can apply for the GM visa via the MISA portal. The necessary documents include passport details, CR, and proof of employment.

Q21: What are the requirements for bringing foreign employees to Saudi Arabia?

A: To bring foreign employees to Saudi Arabia, you’ll need a valid work visa, medical insurance, and compliance with Ministry of Labor regulations. Additionally, an active company CR is required.

Q22: Can the company sponsor visas for foreign employees?

A: Yes, companies can sponsor visas for foreign employees as a standard procedure. Sponsorship is essential for obtaining an Iqama (residency permit) for the employee.

Q23: What is the Iqama, and how do I apply for it?

A: The Iqama is a residency permit for foreign workers in Saudi Arabia. To apply, you must complete medical tests, insurance, and fee payments before submitting your application through the Qiwa and Muqeem Portals.

Q24: How long does it take to obtain an Iqama for foreign employees?

A: Usually, the process takes about 1 week after the employee’s arrival in Saudi Arabia, assuming all documents and medical tests are completed on time.

Q25: What is the process for renewing work visas and Iqamas?

A: Renewals are processed via the Qiwa and Muqeem portals. Ensure that all necessary documents, medical tests, and fees are updated prior to the renewal process.

Q26: Are there any specific healthcare requirements for obtaining an Iqama?

A: Employees are required to undergo a medical examination, which includes health checks and tests for communicable diseases. This must be completed both in their home country and upon arrival in Saudi Arabia.

Q27: What is Saudization (Nitaqat)?

A: Saudization (Nitaqat) is a government initiative that mandates companies to employ a specific percentage of Saudi nationals, aiming to boost local employment opportunities.

Q28: How are companies categorized under Nitaqat?

A: Companies are categorized into four groups—Platinum, Green, Yellow, and Red—based on their adherence to Saudization requirements.

Q29: What are the Saudization percentages for each category?

A: The required Saudization percentages differ based on the industry, size, and nature of the business. Companies categorized as Platinum and Green are in compliance, while Yellow and Red indicate non-compliance.

Q30: What happens if my company does not meet Saudization requirements?

A: Companies that fail to meet Saudization requirements may face several penalties, including:

• Restrictions on renewing work visas.
• Inability to issue new visas.
• Potential delays or suspension of business operations.

Q31: How are part-time Saudi employees counted in Saudization?

A: Part-time Saudi employees are considered as 50% of a full-time Saudi employee when calculating Saudization percentages.

Q32: Do employees with disabilities count toward Saudization?

A: Yes, each employee with a disability counts as four Saudi employees, provided they are employed full-time.

Q33: What are the penalties for non-compliance with Saudization?

A: Non-compliance may result in fines, restrictions on visa issuance or renewal, and potential legal actions.

Q34: What are the benefits of being in the Platinum or Green category under Saudization?

A: Companies in these categories enjoy:

• Faster government services.
• Easier visa issuance.
• Ability to hire expatriates from lower-ranked companies.

Q35: What is the minimum salary to hire a Saudi Employee?

A: Minimum salary for each Saudi Employee should be SAR 4000.

Q36: What support is available for foreign companies to meet Saudization requirements?

A: Support includes:

• Wage subsidies from the HRDF (Human Resources Development Fund).
• Access to Taqat and Tamheer platforms for recruitment.
• Training and upskilling programs for Saudi employees.

Q37: How can I improve my company’s Saudization category?

A: Steps to improve your Saudization status include:

• Hiring Saudi nationals through Qiwa or Taqat platforms.
• Offering flexible work arrangements.
• Investing in training and development for Saudi employees.

Q38: Is medical insurance mandatory for foreign employees?

A: Yes, medical insurance is required for all foreign employees and is essential for obtaining the Iqama.

Q39: What is the penalty for non-compliance with local regulations?

A: Penalties vary depending on the type of violation and may include:

• Fines.
• Suspension or revocation of licenses.
• Restrictions on business operations.

Q40: What compliance requirements must I meet as a foreign business?

A: Compliance requirements for foreign businesses in Saudi Arabia include:

• Ensuring that you maintain valid business licenses such as the CR and MISA license.
• Strict adherence to tax laws, including corporate taxes, VAT, and any other applicable fees.
• Complying with Saudi labor regulations, especially Saudization (Nitaqat) requirements.

Q41: How do I register for VAT, and when is it required?

A: VAT registration is required if your annual turnover exceeds SAR 375,000. You can register through the ZATCA portal and will be required to submit quarterly VAT returns thereafter.

Q42: Are there mandatory audit requirements for foreign businesses?

A: Yes, annual financial audits are mandatory for all foreign businesses operating in Saudi Arabia.

Q43: Can I open multiple companies?

A: Yes, as a foreign investor, you are allowed to open multiple companies. However, each new company will require completing the full company formation steps again.

Q44: Can I operate a virtual office in Saudi Arabia, or do I need a physical presence?

A: A physical office is mandatory for most licenses. However, co-working spaces can provide a physical address for registration purposes, allowing you to meet this requirement.

Q45: What intellectual property protections are available in Saudi Arabia?

A: The Saudi Authority for Intellectual Property allows businesses to register trademarks, patents, and copyrights to safeguard their intellectual property and innovations.

Q46: What is the process for closing or dissolving a business in Saudi Arabia?

A: To close a business, you must:

• Submit a closure request to MISA.
• Cancel all relevant licenses.
• Settle any outstanding debts.
• Notify the relevant authorities about the closure.

The process can take several months, depending on the complexity and nature of the business.

Q47: Can I change the legal structure of my business after registration?

A: Yes, you can change the legal structure (e.g., from a branch to an LLC) by applying through the Ministry of Commerce and MISA. Additional documentation and approvals may be required depending on the type of change.

Q48: Can I conduct e-commerce activities under my business license?

A: Yes, you can conduct e-commerce activities, but your business license must explicitly list e-commerce as an approved activity. Additionally, you may need to register with platforms like Maroof for e-commerce operations.

Q49: Are there any restrictions on foreign ownership of real estate in Saudi Arabia?

A: Foreign companies can own property in Saudi Arabia if it is directly linked to their business operations. Approval from the relevant authorities is required for purchasing commercial or industrial property.

Q50: What are the common challenges foreign startups face in Saudi Arabia?

A: Common challenges include understanding local regulations, navigating language barriers, meeting Saudization quotas, and adapting to cultural and business norms. Working with local consultants can help mitigate these issues.

At Navigate Saudi, we strive to provide you with the most accurate and up-to-date information on setting up your company in Saudi Arabia. If you have any suggestions for corrections or updates, feel free to contact us at setup@ibtdara.com.

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