The development and prosperity of the Saudi Arabian economy have attracted foreign capital and encouraged investors to create economic and investment plans that align with the significant advancements seen in the Kingdom, especially with the implementation of Vision 2030. This makes Saudi Arabia a desirable destination for many investors looking to establish their companies and create investment opportunities. Due to the noticeable interest from investors, whether they are Saudi citizens or foreigners, the Kingdom has set several requirements for establishing a company, with a particular focus on conditions related to foreign investors.
*Can foreigners establish a company in Saudi Arabia?
In recent years, establishing a company in Saudi Arabia for foreigners has become possible. The Kingdom has undertaken several economic reforms and provided facilities to make the business environment more attractive to foreign investors. This includes granting foreigners the right to establish companies with 100% ownership, without needing a Saudi partner, and allowing foreigners to own real estate. Conversely, the conditions for establishing a company in Saudi Arabia for foreigners are more stringent than those for Saudi citizens.
*Establishing a Company for Foreigners in Saudi Arabia:
Establishing a company for foreigners in Saudi Arabia requires compliance with specific conditions set by the Ministry of Commerce, along with several procedures related to drafting the articles of incorporation. The Kingdom has initiated encouraging foreign investments in line with its Vision 2030 by granting numerous privileges to foreign investors, including the ability to establish their companies. However, establishing a company in Saudi Arabia requires foreigners to meet several key conditions, including:
– Compliance with all steps and procedures necessary to establish the company in the Kingdom.
– All partners must have legal capacity.
– The company’s activities must be among those permitted for foreigners.
– The founders of the company must not have any criminal convictions.
– The applicant must comply with all commercial regulations in their home country and have no violations against them.
*Can a foreigner be a partner in a Saudi company?
A foreigner can be a partner in a Saudi company provided:
– There are no fraudulent or legal violations in their record.
– The foreigner provides a permit and official documents from the Ministry of Commerce proving their ability to engage in economic activity.
– The investment is among those allowed for foreigners in the Kingdom.
*Types of Companies in the Saudi System:
Before starting a company, it is essential to understand the types of companies in Saudi Arabia:
– General Partnership: Consists of partners jointly responsible for the company’s obligations and debts.
– Silent Partnership: A hidden company without legal personality.
– Limited Partnership: Consists of two groups of partners:
– At least one general partner who is liable for the company’s obligations and debts with all their assets.
– At least one limited partner who is liable only to the extent of their capital contribution and does not have the status of a trader.
– Joint Stock Company: According to the new Saudi system, this type of company divides its capital into equal, tradable shares, and the company alone is responsible for any obligations or debts incurred.
– Holding Company: A joint-stock or limited liability company that aims to control other joint-stock or limited liability companies by owning more than half of their capital. The name of the company must include the word “holding”.
*Steps to Establish a Company for Foreigners in Saudi Arabia:
Foreigners must follow a series of steps and procedures to establish a company in the Kingdom, including:
– Submitting a foreign investment application to the General Investment Authority.
– Attaching a copy of the articles of incorporation certified by the Saudi Embassy in the investor’s country.
– Specifying the company’s capital, name, and activities.
– Submitting an application to the Ministry of Commerce to reserve the company name.
– Obtaining approval from a notary for the company’s system.
*Temporary Registration for Establishing Foreign Companies:
Temporary registration in the commercial register is recognized for a predetermined period and ends upon completing the specified work. Upon expiration, all partners are removed from the register, and capital and profits are distributed after settling rights. Partners can continue the business by renewing the contract if they wish, and all statutory procedures must be coordinated with the Ministry of Investment and the Ministry of Commerce.
*Costs of Opening a Foreign Company in Saudi Arabia:
After fulfilling the necessary conditions for establishing a company and submitting the required documents, the foreigner must pay the establishment fees at the Chamber of Commerce, which include:
– 1200 Saudi Riyals for establishing a limited liability company.
– 1600 Saudi Riyals for joint-stock companies and registering the trade name.
– 500 Saudi Riyals for publishing the establishment announcement.
– 800 Saudi Riyals for annual Chamber of Commerce registration.
It is noteworthy that establishing the company legally and professionally may require hiring an experienced lawyer to navigate legal and procedural hurdles. You can now contact the Al-Huqban Law Firm team for the necessary information and steps.
*Required Capital for Foreign Investors to Establish a Company in Saudi Arabia:
Foreign investors must allocate an amount not less than 500,000 Saudi Riyals as capital, with at least a quarter of the capital paid upon establishment.
*Benefits of Establishing a Company in Saudi Arabia:
Establishing a company in Saudi Arabia for foreign investors comes with several advantages, including:
– The Kingdom is a member of the World Trade Organization, facilitating global market access and expansion.
– The Kingdom is a hub for North Africa and the Middle East, providing a strategic location for companies wishing to expand in the region.
– Saudi Arabia has a business-friendly environment and a favorable political climate, with the government taking steps to encourage foreign investment, reduce bureaucracy, and offer tax incentives.
– Saudi investment law allows foreigners to own companies 100% without needing a Saudi partner.
– For nationals of the Gulf Cooperation Council countries, the government grants several privileges when establishing companies in the Kingdom.
– The Kingdom boasts a highly developed infrastructure, including numerous airports and ports that connect it globally, facilitating trade, import, and export operations.
*Special Benefits for Foreign Investors in the Kingdom:
The Saudi system encourages and protects foreign investments. Investments are not confiscated except by a judicial ruling, and compensation is paid if confiscation occurs. Additionally, foreign investors benefit from the advantages in agreements to avoid double taxation. The government also offers a low tax rate of 20% on net profits to foreign investors.
In conclusion, establishing a company in Saudi Arabia can be somewhat complex, especially if the investor is not familiar with the necessary procedures and conditions. Therefore, the Al-Haqban Law Firm team offers its services to assist foreign investors in establishing their companies in Saudi Arabia with ease and transparency, guiding them through each step of the establishment process.
