While implementing the various initiatives envisaged in their Vision 2030, Saudi Arabia has launched a series of reforms aimed at diversifying its sources of revenue and promoting economic growth. Allowing 100% foreign ownership in various sectors is one of the most critical steps in this direction.
The 100% foreign owned companies require no local partner while setting them up, allowing them full control of the management of the company. They are also allowed a number of tax incentives and exemptions in specified sectors. The specific requirements to be met while establishing a 100% foreign-owned Limited Liability Company (LLC) in Saudi Arabia are mentioned below.
Saudi Arabia 100% Foreign-Owned LLC Requirements
- Approval from the MISA
- Investment License: MISA clears the foreign investment proposals, but the investor has to ensure his business activities comply with Saudi Arabia’s regulations on investment. A complete business proposal and financial capability may need to be shown.
- Appointing a General Manager and Authorised Representative
- General Manager: This person can be a foreigner or one from Saudi Arabia meeting the registration requirements with the appropriate government authorities.
- Office Space and Business Address
- Physical Office Requirement: The Company must have a registered office in Saudi Arabia. You must sign a lease agreement and provide proof of business address to register with the Ministry of Commerce.
- Address Validation: An officially recognized business address is needed for most government filings.
- Compliance with Saudization Requirements
- Nitaqat Program: The Nitaqat program obliges recruiting a specific percentage of Saudi nationals, depending on the industry and the size of the business entity. Failure to comply will invite penalties and restrictions.
- Bank Account and Capital Deposit
- Corporate Bank Account: The Company must open a corporate bank account with a Saudi bank to deposit the minimum capital. A proof of deposit is received during the process.
- Saudi Bank Confirmation Letter: This confirms that the capital has been deposited and is ready for the company’s business.
- Company Name Registration
- Name Approval: The Ministry of Commerce (MoC) must approve the firm’s name so as not to conflict with existing businesses or trademarked names in Saudi Arabia.
- Compliance with Industry-Specific Regulations
- Sector-Specific Approvals: Some Sectors such as healthcare, telecommunications, or finance, require additional approvals from specialized authorities.
- Work Visas and Labor Law Compliance
- Employee Visas: Expatriate employees of foreign-owned companies should apply for work visas through the Ministry of Human Resources and Social Development (MHRSD).
- Labor Law Compliance: Foreign companies should abide by Saudi labor laws, regarding working hours, employee rights, and contract terms, etc. There are legal penalties for those violating labor laws.
- Tax and Financial Reporting Requirements
- VAT Registration: Foreign organizations whose taxable supplies exceed the VAT registration threshold (375,000 SAR)
- Annual Financial Audits: Foreign-owned LLCs must submit annual audited financial statements to the Ministry of Commerce.
- Insurance Requirements
- Social Insurance (GOSI): All companies must register with the General Organization for Social Insurance (GOSI).
- Health Insurance: Foreign companies must also provide mandatory health insurance for their employees as per Saudi labour laws.
Capital Requirements for Establishing a 100% Foreign-Owned LLC Company in Saudi Arabia
- General Business Activities: A minimum capital of 500,000 SAR (approximately 133,000 USD) is required.
- Industrial or Manufacturing Sectors: In some cases, the capital requirement may exceed 1,000,000 SAR.
- Specialized Sectors: Some sectors, like financial services or insurance, may require significantly higher capital specified by specific authorities like Saudi Arabian Monetary Authority (SAMA).
Documents Required for Establishing a Foreign-Owned Company in Saudi Arabia
- MISA License Application
- Business Plan
- Proof of Minimum Capital
- Copy of Passport
- Company Articles of Association (AoA)
- Resolution to Establish the Company
- Commercial Registration (CR)
- Certified Copy of MISA License
- Articles of Association (AoA)
- Bank Deposit Certificate
- Lease Agreement
- General Manager Appointment Letter
- Registration of Social Insurance and Taxation
- Tax Identification Number (TIN): Necessary for paying taxes and VAT registration.
- Social Insurance Registration: Registering with the General Organization for Social Insurance (GOSI) to cover employees is compulsory.
Conclusion
Establishing a completely foreign-owned business in Saudi Arabia is highly feasible in the present liberalized environment. Helpline Group possessing years of experience with Saudi laws provides assistance for establishing foreign-owned LLCs. They handle licensing, Saudization, and other specific regulations efficiently to avoid legal complications, making the process easy and fast.
