Foreign investment law Saudi Arabia
The Kingdom of Saudi Arabia is endeavoring to foster an attractive investment environment that offers foreign investors great opportunities for growth and expansion, as part of the Kingdom’s Vision 2030, which aims to diversify the economy and promote sustainable development. The Foreign Investment Law in Saudi Arabia was issued by Royal Decree No. M/1 of 1421 AH, which allows foreigners to invest in many sectors with clear conditions and procedures.
In this article, we will cover the basic aspects related to foreign investment in Saudi Arabia, including the steps to establish a foreign company in the Kingdom, a list of operating foreign companies, how to open a company, and business registration fees.
Establishment company Saudi Arabia
Establishing a foreign company in Saudi Arabia is a strategic option for investors wishing to enter the Saudi market and capitalize on the opportunities available. The Kingdom has made it possible for foreign investors to own 100 per cent in some sectors in accordance with the regulations approved by the Saudi Ministry of Investment.
Requirements for establishing a foreign company in Saudi Arabia:
To establish a foreign company in Saudi Arabia, the investor must fulfil the following requirements:
- Obtain a foreign investment license from the Ministry of Investment (MISA).
- Determine the type of legal entity (limited liability company, joint stock company, branch of a foreign company, etc.)
- Deposit the minimum capital (varies according to the type of activity).
- Register the company with the Ministry of Commerce and obtain a commercial register.
- Open a bank account and deposit the specified capital.
- Register with the Zakat, Tax and Customs Authority.
- Obtaining the necessary licenses from the concerned authorities according to the type of activity.
- Limited Liability Company (LLC): The most common type of company among foreign investors.
- Joint Stock Company (JSC): Suitable for large-scale projects that require large amounts of funding.
- Branch of a foreign company: Allows international companies to open branches in the Kingdom without the need for a Saudi partner.
- Representative office or commercial agency: Does not have the right to engage in commercial activity but is used for marketing purposes and market studies.
List of foreign companies in Saudi Arabia
Foreign companies are increasingly active in Saudi Arabia, especially in the energy, petrochemical, technology, financial services, and retail sectors. Some of the most prominent foreign companies operating in Saudi Arabia include:
- Technology companies: Google, Microsoft, and Amazon Web Services have invested in data and IT centers.
- Energy and infrastructure companies: ExxonMobil, Shell, Siemens, and General Electric.
- Automotive companies: Mercedes-Benz, BMW, and Tesla operate in the electric vehicle sector and transport infrastructure.
- Retail and restaurant companies: IKEA, Starbucks, McDonald’s, and Carrefour.
- Financial sector companies: HSBC, Citibank, and Goldman Sachs manage major financial investments in the Kingdom.
These companies enjoy a favorable investment environment supported by government facilities provided by the Ministry of Investment and the Zakat, Tax and Customs Authority.
How to open a company in Saudi Arabia
Opening a foreign company in Saudi Arabia requires going through several official stages, which include:
Step 1: Obtaining a foreign investment license.
An application is submitted electronically through the Saudi Ministry of Investment (MISA).
The following documents must be provided: –
- A copy of the investor’s passport or the commercial register of the parent company.
- An economic feasibility study of the project.
- The company’s articles of association, certified by the competent authorities.
Step 2: Register the company with the Ministry of Commerce.
After the license is approved, the company is registered with the Ministry of Commerce to obtain a commercial register.
An electronic incorporation contract is issued and notarized by the Saudi Court of Justice.
Step 3: Open a bank account and deposit the capital.
You must open a bank account in a Saudi bank and deposit the required capital depending on the type of activity.
Step 4: Register with government agencies.
- Register with the Zakat, Tax and Customs Authority to obtain a tax number.
- Subscribe to social insurance to hire labor.
- Obtaining the necessary additional licenses according to the activity.
Step 5: Start your business.
After completing all the procedures, you can start your business in the Kingdom in accordance with the applicable laws.
Commercial registration fees in Saudi Arabia
Foreign company registration fees in Saudi Arabia depend on the type of company and the nature of the activity. The following are the most important fees:
- Ministry of Investment (MISA) fees for foreign investment license
2000 SAR per year (subject to change according to government updates).
- Commercial Register issuance fees
SAR 200 per year + Chamber of Commerce fees according to the category of activity.
- Incorporation Contract Documentation Fees
Approximately SAR 500 (may vary depending on the type of contract and capital).
- Zakat and Tax Authority registration fees
Registration is free, but companies are subject to 20% income tax on profits, as well as 15% Value Added Tax (VAT) on certain activities.
- Social Insurance Fees for Employees
- 9% of Saudi employees’ salaries are borne by the company.
- 2% of foreign employees’ salaries as an occupational risk insurance fee.
Conclusion
Saudi Arabia offers an attractive investment environment thanks to government facilities, legislative reforms, and rapid economic development, making it an ideal destination for foreign investors. By following the formalities of setting up a foreign company, investors can capitalize on promising opportunities in various sectors of the economy. With continued efforts to improve the business environment, the Kingdom is expected to see more foreign investment in the future.
