For over a decade, Healy Consultants efficiently and effectively assists our Clients with business registration in Saudi Arabia.
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Advantages and Disadvantages
Advantages of Saudi Arabia company registration
- Foreign companies are allowed to bid for government contracts and operate in the Kingdom without a Saudi agent or partner;
- The Saudi Industrial Development Fund makes interest-free loans to industrial companies of up to 50% of the total cost of the project, including pre-operating costs, investment in fixed assets, and working capital. However, a 50% loan requires Saudi participation which is not less than 50%. If Saudi participation is lower, the loan is reduced proportionally;
- To reduce the Kingdom’s dependence on the export of crude oil as the major source of income, the Saudi government welcomes foreign business registration providing i) labor saving equipment and services ii) staff training services iii) all areas of health, personnel, and services iv) food industries utilizing locally abundant agricultural products v) metals manufacturing vi) vehicle manufacturing and vii) solar technologies;
- The Kingdom remains by far the largest Arab market, and is one of the world’s main trading nations in terms of goods and services. Saudi Arabia still depends on imports for most of its manufactured items, and many of its food stuffs. Consequently, local residents are hungry for international products and services and are willing to spend on quality;
- Foreign companies enjoy exemption from customs duties on the import of machinery, equipment, tools, and spare parts for industrial projects.
Disadvantages of Saudi Arabia company registration
- One of the biggest business challenges is government red tape, bureaucracy, and corruption. When there is ambiguity about Saudi law, it gives rise to corruption and unnecessary delays in executing deals in the country;
- A Saudi company suffers corporation tax of 20%. Capital gains are taxed at 20%;
- Foreign companies cannot import goods for resale and direct commercial marketing within the Kingdom to Saudi nationals. A Saudi agent or distributor must be appointed. Only Saudi nationals and 100% Saudi-owned companies may import goods. Importers must be licensed by the Ministry of Commerce;
- Saudi Arabian business practices and laws still favor Saudi citizens. Saudi litigants have an advantage over foreign parties in almost any investment dispute because of their first-hand knowledge of Saudi law and culture. The dispute settlement process favors local parties in a dispute;
- Disputes with Saudi partners causes serious problems for foreign investors. Saudi partners have blocked foreigners’ access to exit visas, forcing them to remain in Saudi Arabia against their will. In cases of alleged fraud, foreign partners may also be jailed to prevent their departure from the country while awaiting police investigation or adjudication of the case. Courts can impose precautionary restraint on personal property pending the adjudication of a commercial dispute;
- The government tenders in procurements favor i) Saudi Arabians ii) companies with Saudi nationals at least 51% of the capital iii) products of Saudi Arabian origin;
- During business registration and corporate bank account opening, the Saudi Government frequently requests documents to be attested by the Saudi Embassy in the country of origin of our Client. This is both a costly and time consuming exercise and complicates the company incorporation process. Examples of documents include: i) passports copies of directors; ii) parent company certificate of incorporation and M&AA; iii) power of attorney issued by the parent company. To overcome this problem, our Clients’ appoint Mr. Aidan Healy as the temporary nominee shareholder, director and bank signatory.
Best uses for a Saudi Arabia companyNon-oil export companies receive free promotion from the Saudi government, so manufacturing and processing companies are well advised to invest in the country to take advantage of this, as well as the duty-free access to the 17 countries of the Greater Arab Free Trade Area.
- Time to incorporate: Nine weeks
- Cost to set up: US$66,950
- Minimum capital: SAR500,000
- Physical office required: Yes
- Shareholders: 2
- Directors: 1
- Company secretary: Yes
- Resident director: Yes
- Corporate tax rate: 20%
- Corporate tax base: Territorial
- Shelf companies: Unavailable
- Main company type: LLC
Frequently asked questions
Is Saudi Arabia business registration a complicated process?
Which authorities must provide approval for Saudi Arabia subsidiary registration?
If it is difficult to register an LLC in Saudi Arabia, how can I conduct business in the Kingdom?Because it is difficult to register a Saudi Arabia resident company, Healy Consultants recommends appointing an agent in Saudi Arabia. Our Clients can sell and distribute their products in the Kingdom through an agent. However, it is important to choose a reliable agent, as contracts are difficult to terminate and legal disputes can be costly.
Why invest in Saudi Arabia?Although registration of a Saudi company for our foreign Clients and working with agents is challenging, Saudi Arabia offers several business opportunities. It is a fast growing economy which intends to diversify. Some of the sectors that have business opportunities include i) oil, gas and petrochemicals ii) water iii) services iv) education v) infrastructure vi) luxury goods and vii) healthcare.
Useful links for Saudi Arabia
Government and public authority websites:
- Saudi Arabia Stock Exchange
- Investment Authority
- Chamber of Commerce
- Saudi Arabia airport
- Visiting Saudi Arabia
- KPMG Saudi Arabia – Business Travelers
- Ministry of Finance – Saudi Arabia economic developments
- Doing Business in The Kingdom of Saudi Arabia
- Saudi Banking Sector
- Company Laws – Saudi Arabian General Investment Authority
- IFC – Saudi Arabia’s economy profile