Registering an Import-Export Business in Saudi Arabia: A Step by Step Guide

Business Education, Guides, Import & Export

2020-06-29

One of the wealthiest and most populous countries in the Middle East, Saudi Arabia is at the center of the Islamic and Arab worlds. Its location at the meeting point of Europe, Africa, and Asia makes it the ideal place to connect people and goods from around the world. This means that Saudi Arabia has a lot of potential as a logistic hub.

With a GDP of US$ 782 billion in 2018, Saudi Arabia is also the largest economy in the Middle East. The annual economic growth over the last seven years has averaged 4% due to its pro-business environment, which makes the country increasingly attractive to foreign investors. Saudi Arabia aims to become one of the largest economies in the world over the next ten years.

Having joined the World Trade Organisation in 2005, Saudi Arabia has become more and more integrated with the world economy, progressing towards alignment with global commercial rules and standards. Demographic changes have led to a focus on producing higher-value goods.

These are some of the reasons why Saudi Arabia has been attracted more and more interest from foreign investors in the last few years. This guide will explain in brief the process of setting up a business in Saudi Arabia. However, bear in mind that, if you do decide to do business in Saudi Arabia, you should get advice from experts familiar with local law and procedures.

Company Formation in Saudi Arabia in 11 Steps

Since 2007, the Saudi Arabian government has greatly simplified the process of forming a company in the Kingdom. The minimum capital needed, as well as the time required to incorporate, has been reduced. In order to register a company in Saudi Arabia, 11 steps need to be followed.

You need to prepare all the documents, which will include legalization by the Saudi consulate. This step will take around two weeks to complete.
An application needs to be submitted to the Saudi Arabian General Investment Authority (SAGIA) in order to obtain an investment license. This takes around 3 to 4 weeks and has a cost of 2000 SR.
You will need to submit Articles of Association and a company name for approval by the Companies Department of the Ministry of Commerce and Industry. This step takes around 5 days.
The Articles of Association will need to be signed in the presence of a notary public. This takes 2 days.
The Articles of Association and company name will also need to be published in the Kingdom’s official gazette. This costs around 5500 SR and takes 2 days.
Afterward, you’ll need to open a bank account. This will be used to transfer capital. You will need to get a certificate stating the capital has been deposited. This step takes 2 weeks.
You may also need to register with the General Department of Passports, the Ministry of the Interior, and the Ministry of Labor to obtain a work visa for the company manager. This also takes 2 weeks.
The company manager will need to get his visa stamped at the Saudi consulate and get his work and residence permits when arriving in the country. This process takes 2 weeks.
You will also need to register with the Commercial Registry at the Ministry of Commerce and Industry as well as the Chamber of Commerce. This step takes 2 days and has a cost of 8100 SR.
Then, you need to get a file number and certificate of business commencement. This is done by registering with the Department of Zakat and Income Tax (DZIT), a part of the Ministry of Finance. This only takes one day.
Finally, you will need to register with the General Organisation of Social Insurance (one day).

Unlike other Gulf states, the Kingdom of Saudi Arabia places no limit on the ownership of companies by foreigners. This means that you will not need the sponsorship of a Saudi national in order to set up your business in the country.

Types of Company Formation in Saudi Arabia

Several types of company can be legally formed in the Kingdom of Saudi Arabia. The authorities of Saudi Arabia have greatly simplified the process of company formation in the country, and have opened up the country to foreign investment. New regulations make it easier for investors and business owners to form any of the following legal entities to carry out various business activities in the market. Each of the business types below comes with advantages, and whatever type of business is chosen will depend on business requirements.

Single Member Limited Liability Company (SMLLC)

This type of company can have one or more owners, which are known as “members.” In this business entity, the owners all hold shares in the company. The fact that this company has limited liability protects the members from liability, which is assumed by the company as a whole. However, a person cannot establish or own more than one Single Member Limited Liability Company.

Joint Stock Company (JSC)

In the case of a Joint Stock Company (JSC), the capital is divided into shares of equal value. These shares are owned by shareholders. Shareholders can buy, transfer, and sell their own shares without this having impact on the existence of the company. To establish a Joint Stock Company in Saudi Arabia, you need to submit the company’s name, purpose, and a Memorandum of Association that details the number of members.

Limited Liability Company (LLC)

This is the most commonly used business entity in Saudi Arabia. A Limited Liability Company allows limited liability for owners under the company’s debt. However, this type of company cannot have more than 50 shareholders. Each shareholder is required to sign the Memorandum of Association. The company also needs to appoint one or more auditors, depending on business requirements. To form a Limited Liability Company in Saudi Arabia, details regarding shareholders, management, capital, auditors, and other business-related information need to be provided to the regulating authorities.

Foreign Company Branch

Foreign companies can establish branches, agencies, offices, or other business forms in Saudi Arabian. A Foreign Company Branch can represent its parent company and conduct business activities in Saudi Arabia. In any case, it needs to comply with local laws and regulations. These include using the Arabic language for company publications and documents.

How to Sell Products in Saudi Arabia

The process and business types described above, although simplified, may not be appropriate if you’re just trying to sell, for example, some lots of refurbished electronics to buyers in Saudi Arabia. In fact, many of the different types of business you can form in the Kingdom are more suited for larger companies, as they come with regulatory and capital requirements that are not appropriate for a smaller business trying to export to the country.

But there are ways in which you could more easily sell your products in Saudi Arabia. One of the easiest ways would be to set up a company as a sole trader in Saudi Arabia. There are no local sponsorship requirements, unlike some other Gulf region countries. However, the initial capital investment threshold may be relatively high: 100 000 SR (around 25 thousand US dollars). And even then, although access by foreign investors has been liberalized to a large extent, there are still some limitations and constraints, namely on the kinds of sectors foreigners are still barred from (e.g., photography, audiovisual services, etc.).

If your only aim is to sell your products to consumers in Saudi Arabia, it might be easier and less costly to simply export directly. You can legally make direct sales to the private sector in Saudi Arabia from outside the country, provided that health and safety standards are met. Dealing with the public sector, on the other hand, will require that you use a local agent.

Unlike other Gulf countries, there is no legal requirement to hire a local agent if you’re only doing business with the private sector.

Although not a legal requirement, the US government advises all US companies new to the Saudi Arabia market to work with a local Saudi agent or distributor. This will help deal with import and standards regulations, as well as in monitoring business opportunities.

Taxation

Regardless of the type of business you set up in Saudi Arabia, you will inevitably need to deal with taxation. You need to keep in mind that there are two components of taxation in Saudi Arabia: income tax and Zakat. Income tax applies to both citizens of the country and foreign nationals, whereas Zakat is the religious charitable levy that only applies to Saudi and Gulf Cooperation Council nationals (Bahrain, Kuwait, Oman, Qatar, and United Arab Emirates).

As mentioned above, any company registered in Saudi Arabia will need to register with the Department of Zakat and Income Tax. Without this registration, the company cannot conduct business in the country.

Also, keep in mind that any non-resident person who does business in the Kingdom of Saudi Arabia is liable to pay income tax. This includes non-resident investors, as well as resident companies that have non-Saudi nationals as shareholders. As usual, it is always best to seek professional advice from experts familiar with local taxation laws and procedures.