Success tips when doing business in Saudi Arabia
- The week commences on Sunday and extends through Thursday, in line with the rest of the Arab world. Until recently, the weekend had been on Thursday and Friday rather than the Friday and Saturday ordinarily observed by Islamic countries;
- The Labour Law expressly prohibits the mingling of men and women in the workplace. Medical expenses related to pregnancy and delivery must be paid by the employer;
- Saudis are hospitable and place a great deal of emphasis on an outward expression of politeness and quiet demeanour. Arabs rarely say a direct ‘no’ to a proposition, so you must listen and observe carefully. If the response is ‘leave it with me’ or ‘I’ll think about it’, there’s a good chance that the project will go nowhere;
- All government business in Saudi Arabia is conducted according to the Islamic calendar. Because the Islamic year is eleven days shorter than the Western calendar, foreign entrepreneurs pursuing Saudi Arabia business setup are sometimes confused. For example, a one month visa is valid for an Islamic month, not a Western one. If you stay for a Western month, there is a distinct possibility you will have lapsed the visa by a day or two;
- The government has a strategic goal to increase the proportion of Saudi employees in both the public and private sectors. This policy is known as “Saudization” and is effected by requiring companies to employ a certain percentage of Saudi citizens. Generally, 30% of the workforce must be Saudi unless the business relates to construction, cleaning, or operational work, in which case the requirement is 10%;
- Because Saudi Arabian companies are not as well-versed with international trade, we encourage our Clients to consistently use and sign contracts of service;
- Your joint venture partner or Saudi Arabia shareholder must not merely be a nominee for the sake of meeting the rules of foreign company incorporation. You should choose a partner that actually brings a lot to the table, including local knowledge your business would need in Saudi Arabia;
- Foreign companies should be aware i) Saudi statistics and market data are usually imprecise ii) transactions tend to take longer than expected iii) more frequent and longer market visits are required, at least initially iv) complex business procedures are common;
- Saudi customers will invariably focus on price, no matter how hard you sell the benefits. Price drives most Arab business negotiations;
- Each major business centre in Saudi Arabia has a Chamber of Commerce. Their powerful membership embraces the local business community. Chamber functions provide useful networking opportunities for companies new to the market.
Interesting facts about Saudi Arabia
- Saudi Arabia is the largest Arab state in Western Asia by land area (approximately 2,250,000 km2 (870,000 sq mi), constituting the bulk of the Arabian Peninsula) and the second-largest in the Arab world (after Algeria);
- Saudi Arabia has the world’s second largest oil reserves which are concentrated largely in the Eastern Province. Oil accounts for more than 95% of exports and 70% of government revenue, although the share of the non-oil economy has been growing recently;
- The Kingdom of Saudi Arabia was founded by Abdul-Aziz bin Saud in 1932, although the conquests which eventually led to the creation of the Kingdom began in 1902 when he captured Riyadh, the ancestral home of his family, the House of Saud, referred to in Arabic as Al Saud;
- The Saudi Arabian government has been an absolute monarchy since its inception, and it describes itself as being Islamic;
- Saudi Arabia’s geography is dominated by the Arabian desert and associated semi-desert and shrubland. It is, in fact, a number of linked deserts and includes the 647,500 km2 Rub’ al Khali (“Empty Quarter”) in the southern part of the country, the world’s largest contiguous sand desert. There are virtually no rivers or lakes in the country;
- The official language of Saudi Arabia is Arabic. The three main regional variants spoken by Saudis are Hejazi Arabic (about 6 million speakers), Nejdi Arabic (about 8 million speakers) and Persian Gulf (about 1.5 million speakers). The large expatriate communities also speak their own languages, the most numerous being Malayalam (1 million), Tagalog (700,000), Urdu (380,000), and Egyptian Arabic (300,000);
- Saudi Arabia, and specifically the Hejaz, as the cradle of Islam, has many of the most significant historic Muslim sites including the two holiest sites of Mecca and Medina;
- One of the King’s titles is Custodian of the Two Holy Mosques, the two mosques being Masjid al-Haram in Mecca, which contains Islam’s most sacred place, the Kaaba, and Al-Masjid al-Nabawi in Medina which contains Muhammad’s tomb;
- The population of Saudi Arabia as of July 2010 is estimated to be 25,731,776 including 5,576,076 non-nationals. In 1950, Saudi Arabia had a population of 3 million. The ethnic composition of Saudi nationals is 90% Arab and 10% Afro-Arab. Until the 1960s, a majority of the population was nomadic but presently more than 95% of the population is settled, due to rapid economic and urban growth.
Frequently asked questions
What are the main advantages of establishing a Saudi company?A Saudi company is able to obtain government licenses, open corporate bank accounts and hire expatriate staff, bid on local contracts, issue sales invoices, and purchase goods and services from local suppliers. Saudi Arabia also has the largest financial market in the Middle East, low cost energy, facilities, and business services.
How many directors/shareholders are required for a Saudi company?A minimum of two directors and shareholders are required and a maximum of 50 shareholders are allowed.
Does the director have to be resident in the Kingdom?No. There is no residency requirement.
Are there any nationality requirements for the shareholders of a Saudi company?No. Unlike the legislation of other GCC states, Saudi law does not restrict the level of foreign participation allowed in Saudi LLCs. Companies which are owned by foreigners may also be registered in the Commercial Register. An LLC may have one or more managers and there is no requirement for the managers to be Saudi nationals either.
Is a Saudi company subject to an annual audit?In accordance with Saudi Arabian company law, a Saudi LLC is required to submit an annual tax return and financial statement.
Is a Saudi company legally required to have a physical office in the Kingdom?Yes. showing a tenancy agreement is a legal part of the company incorporation process. However, some clients are uncomfortable with or unable to find office premises at this early stage of an engagement. Consequently, Healy Consultants offers the use of our Saudi Arabia office premises to fulfill this requirement.
Am I required to visit Saudi Arabia to set up a company?No. Healy Consultants can legally set up a company without you needing to travel to the Kingdom. However if you wish, business visas are available for prospective entrepreneurs.
What are the minimum capital requirements for a Saudi Arabia company?The minimum capital requirement for formation of a limited liability company (LLC) in Saudi Arabia varies depending on the business sector of the company. For example, a company involved in agriculture requires SR25,000,000 (approximately US$6.67 million), while a contracting company requires SR500,000 (approximately US$133,000).
Does this capital have to be paid up prior to incorporation?Yes. It will be deposited into an ESCROW bank account. The bank will issue a certificate confirming the deposit, and this certificate is one of the documents required for company incorporation. The certificate should also include an undertaking from the bank to retain the amount until after full commercial registration.