Setting Up Business in Saudi Arabia
The Kingdom of Saudi Arabia (KSA) is the world’s largest oil producer and exporter and controls the world’s second-largest hydrocarbon reserves. Some the leading Business firms in Saudi Arabia play the role of major contributors in the Global market. Setting up business in Saudi Arabia may not be an easy task for non natives, but dont worry Jadwa Business Consultancy will assist you through out the process.
It is the only Arab country to be part of the major economies of the G-20, the Organization for Islamic Cooperation and OPEC. In addition to the global situation, there are significant business opportunities emerging from relatively high-income populations.
- The Kingdom of Saudi Arabia (“KSA”) is the largest Arab state, founded in 1932.
- Saudi Arabia is one of the most popular and richest nations in the Middle East, the heart of the Islamic and Arab world.
- Based on the convergence of Europe, Asia and Africa, the Kingdom is a natural bridge that connects people and goods around the world, and is a key logistics hub for both global trade and business expansion.
- The Saudi Arabian economy has experienced an average annual growth rate of 4% over the past seven years, supported by a pro-business environment that is rapidly moving investors to the heart of the Arab market.
- The Kingdom is fully committed to developing an investment environment: enormous efforts have been made to promote the business ecosystem and new activities are already planned to facilitate business.
- The total CSA population is 28.7 million, of which 20 million are CSA citizens and about 8 million are foreigners.
- KSA holds approximately 20% of the world’s registered oil reserves. It is the largest oil exporter and plays a leading role in OPEC. The oil sector accounts for approximately 80% of budget revenues, 45% of GDP and 90% of export revenues.
- The Government has continued to carry out economic reform, diversification, and promotion of foreign investment, especially since the entry of the CSA into the World Trade Organization (WTO) in December 2005.
- 100% foreign ownership of property and companies in certain industries
- Lower minimum capital requirements
- No restrictions on capital repatriation
- The ability for foreign investors to sponsor foreign workers.
- Tax benefits if the company is incorporated in certain “economic cities” located in less developed CSR provinces.
It should be noted that the Law on Foreign Investments allows foreign investors to carry out activities in all sectors of the economy, except for the activity that is on the negative list.
The minimum capital required for foreign investors investing in the industrial sector is SAR 1 000 000 for all types of enterprises, except for the technical and scientific institution that does not require the minimum capital.
For the services sector, the minimum capital requirement is SAR 500,000.
For limited liability business firms in Saudi Arabia operating in the trading sector, the minimum capital requirement is SAR 20,000,000 and requires a local partner (KSA) to hold at least 25% of the company’s shares (ie maximum foreign ownership of the trading company is limited to 75%).
There are no personal income tax rates in the CSA. However, social security contributions apply.
The Social Security tax is paid on a monthly basis based on the monthly basic salary plus housing with an upper limit of SAR 45,000 and is calculated at a rate of 2% for non-KSA employees and is paid by the employer. For KSA employees, the rate is 22%, paid both by employees (10%) and by employers (12%).