5 Things You Need to Know About Expanding Your Business to Saudi Arabia

Anika Eliz Baby
Astrolabs

You’ve probably heard a lot about Saudi Arabia in the business news lately. The country is making big changes, and there’s a lot of buzz about all the new opportunities there. 

If you’ve been thinking about where to take your business next, Saudi Arabia might just be the answer. The country is opening its doors even wider for foreign businesses

With new rules that make it easier to set up shop and a young, tech-friendly population, Saudi is becoming a hotspot for companies looking to grow. The country is planning for a future filled with innovation, as is evident from all the investments being made in technology and infrastructure.

Keep scrolling to read everything you need to know about expanding to Saudi Arabia…

5. You own your business: Saudi Arabia allows 100% foreign ownership

If you’ve been keeping tabs on global business trends, you’d know that Saudi Arabia is making some big moves. One of the most exciting changes? They have allowed foreign companies 100% ownership over their venture. Since 2018, AstroLabs, the leading business expansion platform in the Gulf, has supported over 450 foreign companies to set up a fully-owned branch in the Kingdom. 

This year, just three weeks after it was announced that the Kingdom would allow foreigners to own property in Saudi Arabia, the country also made a decision to allow foreigners to fully own their companies in the new special economic zones.

But before you pack your bags, there are a few things to keep in mind:

  • Eligibility: To own 100% of your business in Saudi Arabia, you should have an established company in your home country that’s been operational for more than a year. Plus, it should have a positive financial track record, backed by an audited financial report from the last business year.
  • Activities: While service-related activities are pretty open to foreign ownership, trading activities come with a hefty share capital requirement of SAR 30,000,000. Additionally, for most professional activities, be prepared for a 25% Saudi ownership requirement. 
  • Restrictions: There are also a few no-go zones for foreign investors, like defense equipment manufacturing, real estate in Medinah and Makkah, and the oil and gas exploration sector, to name a few.

4. You can have your business up and running in 3 months

Setting up a business in a new country can seem daunting. However, in Saudi Arabia, the process is streamlined. In fact, with the right guidance, you can have your business up and running in just three months.

Let’s give you a bird’s eye view of what this journey looks like. You can read more about each step on Setup In Saudi.

  1. Stage 1: Building the Foundation for the Legal Entity (2-3 weeks) — This stage is all about laying the groundwork. It encompasses five crucial steps, from obtaining a MISA Investor License (which lets you own and operate your business 100% in the Kingdom) to registering with the Chamber of Commerce. By the end of this stage, your legal entity will be established in the Saudi market.
  2. Stage 2: Getting Authorization to Hire Staff (2-3 weeks) — Now that your business is legally set up, it’s time to think about your team. This stage focuses on getting the necessary permissions to hire staff. It includes steps like registering with the Ministry of Labor, getting a company seal, and even issuing a GM Visa for a one-time entry to KSA. By the end of this stage, you’ll be all set to bring in your team and kickstart operations.
  3. Stage 3: Acquiring Residency and Opening a Bank Account (1-2 weeks) — The final stage is about settling in. Your General Manager will need to become a resident of Saudi Arabia, and you’ll need to open a bank account for your local company. This stage walks you through the process, from activating your Chamber of Commerce account to registering with various portals like Absher and Qiwa.

Three stages, 20 steps, and six months — that’s all it takes to set up your business in Saudi Arabia. While it might seem like a lot at first glance, once you find a local market entry partner to guide you, your business will become well-established, compliant, and ready to grow in no time. 

 

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3. Setting up Regional Headquarters (RHQ) in Saudi Arabia

If you’re aiming for government contracts in Saudi Arabia, setting up an RHQ is a must.

To help companies meet this objective, the Ministry of Investment Saudi Arabia (MISA) and the Royal Commission for Riyadh City (RCRC) developed the Regional Headquarters Program. Its goal is to get global companies to set up their regional headquarters right in the heart of Saudi Arabia. This is a key part of the Kingdom’s “Vision 2030” initiatives and plans to make Riyadh a top global economic hub by 2030.

So, what does this mean for foreign-owned businesses?

While setting up an RHQ in Saudi Arabia is about compliance, it actually comes with a lot of perks for foreign-owned businesses. For instance, you’ll probably get better visa limits, as well as tax and Saudization exemptions.

What’s more, since RHQs are not intended for commercial activities or revenue generation, they’re free from the usual 20% income tax. And if you’re in special economic zones like the King Abdullah Economic City (KAEC) or King Abdulaziz Financial District (KAFD), you can also get exemptions from withholding tax, which can range from 5-20%.

Recently, the Saudi government reminded companies about the RHQ license deadline coming closer as we hit Janaury 1, in less than 3 months. Fortunately, AstroLabs’ on-ground team of 30 Saudi specialists can fast-track your RHQ license process.

2. You can leverage Saudi’s Special Economic Zones (SEZs)

Launched to speed up economic diversification and offer a fresh approach for investors, Saudi Arabia’s SEZs come with special commercial regulations. These zones cater to a variety of sectors, from light industries like biopharmaceuticals and car assembly to cloud computing and logistics. The idea behind them is to give investors a platform to boost their regional and international growth through a global market.

Why should you care?

Expanding into Saudi Arabia’s SEZs comes with incentives to make business operations smoother and more profitable, such as:

  • 5% Corporate Income Tax rate for up to two decades.
  • No withholding tax when you’re moving profits from SEZs to foreign countries.
  • Customs duties deferral or even a complete waiver on capital equipment and inputs inside SEZs.
  • Saudization regulations are flexible and supportive, especially in the first 5 years.
  • No VAT for all goods exchanged within and between the SEZs.
  • No double taxation, thanks to special tax treatments aligned with OECD principles.
  • Competitive rates for utilities, especially electricity.
  • Exemption from operational fees within SEZs for your employees and their families.

 

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1. You need to meet the Saudization Quota (Nitaqat)

Saudization, developed by the Ministry of Labor and Social Development, is all about empowering Saudi nationals and ensuring they play a pivotal role in the nation’s economic growth. Its goal is to reduce unemployment among Saudis and lessen the Kingdom’s reliance on foreign labor. In simple terms, if you’re a business in Saudi Arabia (including a foreign-owned company), you must have a certain number of Saudi nationals on your team.

The rules are very specific but variable. Factors like your industry, company size, classification, and even your location within the country can influence your Saudization quota. 

Why does it matter?

For Saudi citizens, Saudization opens doors. More job opportunities, skill development, and a chance to be a part of diverse industries. But it’s not just a one-sided benefit. Businesses, especially growing startups and SMEs, get to tap into a talent pool that knows the Saudi market inside out. This local expertise can be a game-changer, improving product localization and boosting customer service.

Ready to Make the Move?

Navigating a new market can be challenging, but that’s where having the right partner makes all the difference.

With a deep understanding of the Saudi business ecosystem and a track record of guiding companies to success, AstroLabs is the ally you need. They’ll be your on-ground partner, guiding your way and ensuring your journey into the Saudi market is smooth, compliant, and lucrative.

So, if you want to make the dream of expanding to the heart of the Middle East a reality, expand with AstroLabs!

 

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