In most countries, it’s hard to have a physical company if you do not live there, and also hard if you are an expat. In some countries in the Middle East, like Algeria, it’s pretty much impossible as an immigrant to own your own company.
In the past, having a local partner has been the most obvious way to set up a company in such countries. The other most common way are freezones.
When I set up my company in the UAE in late 2015, I did so within the DMCC free zone. It ticked all the boxes for me, it was an established free zone, everything was online and they even had a partnership with AstroLabs, a co-working space, that made the initial stages of getting the visa sorted, having a ready-made office space, all pretty straightforward.
Some two years later, when looking to open up a branch in Saudi Arabia, I was looking for options, and here is what I learned about the options available
With so much happening in Saudi Arabia as the country implements Vision 2030 – Now is a great time to open a business
1. Local partners
It’s a very good way to enter a market you don’t know, to have a partner who has been operating there a while, as in, expats in KSA who have a local partner already, and you can partner with their existing set up, for finding a Saudi national to partner with as well.
The problem I faced was finding the right partner, all the existing companies were busy doing their own thing, and would have changed our business strategy to make it fit under their set up, and also potentially impacted who we operate in the UAE. There was also a concern I had, that if I signed somewhere that a partner who I don’t really know, technically on paper owns 515 of my company, I’m not really in control should anything go wrong, or to drive the business in the direction I see fit.
I had been working in the Saudi market in and out from the UAE for the past 5 years, and when I turned to friends who were based there for longer for advice, many said to avoid the partner set up, as they had seen two many things go wrong for startups.
So after many meetings, draft MOU’s and consultation, I wasn’t able to put the right system in place for what we wanted to achieve, and decided that this option wasn’t working out for us.
Although the Economic Cities Authority exists, freezones don’t work with as advertised as of yet and companies are limited to only operating within their area.
3. Foreign Company Ownership
Getting nowhere, I turned to Google, there are services online which extortionate fees to assist foreign company ownership. I thought to myself, that these services have been designed for large global consultancies or oil & gas conglomerates, and not really fit for purpose for a new media startup.
As I mentioned, I had a good experience with Astrolabs in the UAE, and knew they were looking to expand to the Saudi market. However, part of their co-working space model for 100% owned startups, relied on free zones, as point 2 above, so I didn’t think that it would work for me.
But, together with SAGIA (Saudi Arabia Foreign Investment Authority), they had started offering a service where they would assist with the first and most important step, the CR, commercial registration.
AstroLabs representative in Riyadh, Saad, couldn’t have been more helpful, and patient – you need patience dealing with lots of different entities, and documents. He was there on hand for all the meetings, went to check on the progress when I wasn’t around, and kept me informed of how things were progressing.
That feeling when it all works out
Then the day came, about a month after the process started, that we had the Commercial Registration. There are many more steps after that, and there will be back and forth over the document, naming conventions, but in a relatively short space of time, (shorter than it took to set up in UAE), we had a 5 year business license to operate in KSA, costing for 5 years what it would cost 1 year in the UAE. Fees on top of that were about, and I incurred some additional travel costs.
- Saudi Commercial Registration 5 Year (SR 6,000)
- Saudi Chamber of Commerce Certificate 5 Year (SR 10,289.69)
- KSA SAGIA License 5 Years (SR 10,000.00)
What about taxes?
There are income taxes of 20%, social security taxes of 12% and Zakat or 2.5%. Not unlike business taxes in many countries around the world.
But now I was in a place where I had what I needed to go to the Labor Ministry to get Iqama’s for staff, to open and rent an office and to open a bank account, all under a business name that I owned 100%.
There will always be costs of doing business, and I’m happy to pay taxes if it means that our business is growing, and that the economy is growing at the same time, then it’s a win win situation.
The great thing is that once we were independent, we then found a partner company who’s skills and services complimented ours, and we were able to share an office with them.
It’s good to see synergy in services between KSA and UAE for startups.
I’ve seen the co-working space the AstroLabs are building in Riyadh, Al Malga area, complete with an open-air rooftop, and am sure that once it’s ready, those who start out there will have a great experience.