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Startup advice: How to set up a business in Saudi Arabia

Startup advice: How to set up a business in Saudi Arabia
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Paul Arnold is the managing director at Sovereign PPG Saudi Arabia, a provider of corporate and trusts services

  1. What are the initial steps involved in setting up a business in Saudi Arabia?

To set up a business in Saudi Arabia, there can be varying requirements depending on the entity type. The process is generally similar, from registration, licensing to set up. Companies must complete the following steps in order to begin the process of setting up a business in Saudi Arabia:

  1. Register with the Ministry of Commerce and Industry (MOCI).

  2. Foreign owned companies must register with the Ministry of Investment (MISA) – formerly known as ‘SAGIA’.

  3. Open a local Saudi Arabia bank account.

  4. Register Wasel – the mandatory provision of a local address to the government. LLCs will require a physical local office lease and address as a virtual office is not sufficient.

  5. Register with the Ministry of Labour and Social Development (MLSD) visa issuing authority to permit labour in-country.

  6. Register with the General Organisation of Social Insurance (GOSI) - a mandatory social insurance for processing salaries monthly and maintains government records for the Saudisation quota system.

  1. What are the necessary documents to begin the procedure?

To begin the process of setting up and registering a company in Saudi Arabia, the following documents are required:

  • The Commercial Registration (CR) or business licence – Issued by MOCI, the CR certificate outlines and enables the company to conduct business activities in Saudi Arabia, and allows the same rights as given to a citizen.

  • The Memorandum of Association (MoA) or Articles of Association (AoA) – Approved by MOCI and signed in the presence of a notary.

  • A Certificate of Incumbency. 

  • For foreign companies setting up in Saudi Arabia, they require an audited financial statement for the last financial year

  • A passport copy of the assigned General Manager of the Saudi Arabian entity.

For certain activity types, the company would require specific licensing from the relevant government departments, for example, a pharmaceutical company would require a Saudi Food and Drug Association licence.

  1. What should a company's next steps be in establishing itself in the region?

After engaging with and submitting the previously mentioned processes and documents, the company would then need to wait for approval from MOCI and MISA, after which they would then become a successfully formed company in Saudi Arabia.

  1. How can companies prepare themselves for possible expansion?

When preparing to expand into the Saudi Arabian market, companies should make sure that they have enough capital available to support the requirements of establishing an entity in Saudi Arabia.

A company may expand into the market in Saudi Arabia using a number of foreign owned entity types including:

  • A Limited Liability Company (LLC), which, through MISA, is permitted to be 100 per cent foreign owned;

  • A Limited Liability One-Person Company;

  • A Joint Stock Company;

  • A Foreign Company Branch, and;

  • A Sole Establishment.

  1. What regulations are in place in the moving/expansion process?

When expanding into Saudi Arabia, there are standard regulations in terms of the processes and documents required to ensure achieving a successful company formation through MOCI. One key regulatory requirement post incorporation in the Kingdom is the Saudisation quota requirement, whereby it is necessary to hire a certain percentage of the company’s workforce locally, this can be subject to change and is specific to the industry and job designations of the employees. 

  1. Are trademarks/patents necessary? If yes, what is the process of establishing trademarks before expanding?

To set up a business in Saudi Arabia, a trademark or patent is not generally necessary, and would be dependent on the intellectual properties of the business. However, trademarking is available in Saudi Arabia. The process for trademarking is achieved through registering the trademark with the Ministry of Commerce and Investment of Saudi Arabia (MOCI). It is not required to have a trademark to register a business in Saudi Arabia, but registering your trademark in the country is beneficial for companies to protect their name and products.

  1. Is it possible for SMEs as well? And if so, how?

Expanding into Saudi Arabia is possible for SMEs, provided that they meet the requirements specific to their business activity, in the same way as any other business, such as capital and properly processed application documents. The main things to consider are the primary and secondary registrations, General Manager residency (Iqama), hiring authorisation and a local bank account.

 

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