The Kingdom of Saudi Arabia (“KSA”) is one of the most well-known markets in the Middle East. Globally, it is recognised as an ideal location to set up a business and launch investment funds. Its regional and global success can be attributed to numerous factors – diversified sectors, robust economies and rich investment opportunities, to name a few. 

A significant program currently in play in Saudi Arabia is the Vision 2030. Launched in 2016, this initiative sets a roadmap for the development of three main pillars in the KSA, namely in its society, economy and public sectors, through the implementation of several programs and projects. 

For instance, the KSA introduced the Regional Headquarters Program (“RHQ”) to attract multinational corporations (“MNCs”) to establish regional bases in the country. Moreover, other significant drivers of the Vision 2023 are the Kingdom’s Public Investment Funds (“PIF”) and the “giga-projects” designed to further stimulate economic growth. 

Interested in setting up a business in the KSA? This article provides an overview of what you need to know before entering the KSA market. 

Company types in the KSA

Whether establishing a new business or launching an existing one from a foreign country, choosing a suitable corporate entity provides a solid foundation for your venture in the KSA. 

According to the new Saudi Companies Law, effective as of 19 January 2023 (Law), companies in the KSA can be formed as the following: 

1. General Partnership. A general partnership is a company incorporated by two or more natural or legal persons. They are jointly and personally liable for the company’s debts and liabilities. 

2. Limited Partnership. A limited partnership is a company that is comprised of two groups of partners in which: (a) one group shall include at least one general partner who will be jointly and personally liable for the company’s debts and liabilities, and (b) the other group shall include at least one limited partner who shall not be, or have limited liability for the company’s debts and liabilities.  

3. Joint-stock Company (“JSC”). A JSC is a company incorporated by one or more natural or legal persons. Its capital can be divided into tradeable shares, making it suitable for larger enterprises.  

4. Simplified joint-stock Company (“SJSC”). The SJSC, as its name implies, is a joint stock company in a simplified form in terms of flexibility (e.g., no minimum capital requirements, ease of passing shareholders’ resolutions).  

5. Limited Liability Company (“LLC”). An LLC is a company with its assets and liabilities separate from those of its partners or owner. It is the most favoured and commonly used corporate entity in the KSA.  

In addition to the abovementioned structures, companies with overseas ownership interested in conducting services in the KSA can establish a branch office.  

How to set up a company in Saudi Arabia

The procedures associated with establishing a company in Saudi Arabia vary from one business entity to another. We outline the company formation process for the LLC, being the most popular and commonly used company type in the KSA. 

Learn more about the know-hows of setting up a company in Saudi Arabia with the assistance of our experts. Contact one of our team members now.  

Business continuity through compliance

Once you have successfully set up a company in the KSA, ensuring you comply with your regulatory obligations is just as important. Some of the ongoing obligations of corporate entities set up in the KSA are as follows:  

• Accounting standards. All companies in the KSA must use International Financial Reporting Standards (“IFRS”) endorsed by the Saudi Organization for Chartered and Professional Accountants (“SOCPA”).  
• Audit requirements. Companies must have one (or more) independent auditor who is a member of the SOCPA and licensed to practice in the KSA. Moreover, companies must have annual independent audits and accounts prepared under the IFRS in Arabic.  
• Accounting books and records. Companies with accounts exceeding SAR 100,000 are required to keep the following books of account in Arabic: (a) daily journal, (b) general ledger and (c) inventory book.  
• Financial reporting requirements. Companies must submit their annual financial statements by 31 March of the following reporting year.  
• Registration renewal. Companies are required to renew their Certificate of Registration, also known as the Commercial Registration, annually with the MOCI.  
• Investment License renewal.  Investors with the Foreign Investment License from MISA must renew their licenses before the expiry period, which would range from one to five years. 
• VAT registration. Companies with taxable sales above SAR 375,000 in the last 12 months (or expected to exceed the threshold in the coming 12 months) are obliged to register, collect and file Value Added Tax (“VAT”) reports. Non-resident companies, however, must apply for VAT regardless of the registration threshold. 

Business culture in the KSA

Aside from the requirements and procedures, it is crucial to have a thorough understanding of the market and be aware of the business culture when setting up a business in a foreign landscape. 

Foreign entities looking to start a business in the KSA but unfamiliar with the market must take extra steps to build a robust foundation in the country. According to Levari Law Partner Yasmin Alafaliq, this includes conducting market research to gain insights into the industry, regulatory frameworks and standard business practices in Saudi Arabia.  

Alafaliq added that it could also be advantageous to explore the option of having a local partner or sponsor who can assist in navigating the country-specific legal requirements, understanding cultural nuances and establishing essential connections in the market. She emphasised that building a successful business in Saudi Arabia “requires time, dedication and adaptability.” 

The business culture in Saudi Arabia is typically hierarchical and relationship-oriented. Relationships and trust are crucial in business dealings, and building personal connections through socializing and networking is often emphasized. Respecting the local customs, traditions and Islamic values is essential for successful business operations in Saudi Arabia. Overall, the business culture in Saudi Arabia is formal, structured and focused on establishing strong personal relationships. 

Yasmin Alafaliq
Levari Law Partner

Touching on the implementation of the numerous programs under the Saudi Vision 2030, Alafaliq listed what the business operating in the KSA should expect and be prepared for, as follows:  

• Market opportunities. Businesses in industries aligned with the Saudi Vision 2030’s priorities (e.g., non-oil sectors, innovation, healthcare, education, tourism) may acquire new market opportunities and increased business demand.  
• Regulatory changes. Companies are encouraged to anticipate regulatory changes in taxation, labor laws, licensing requirements and industry regulations.  
• Investment incentives. To attract local and foreign investments, the Saudi government offers various incentives (e.g., tax breaks and subsidies) that businesses could utilise to optimise their investment strategies.   
• Partnership opportunities. Businesses contributing to the Saudi Vision 2030 may realise opportunities for partnerships and strategic alliances with government entities, local companies and international partners. 

Company formation in the Middle East with Bolder Group

There are numerous aspects to note and be aware of when successfully launching a business, especially in a market you may be unfamiliar with. Navigating the business landscape and satisfying the various requirements, procedures and compliance obligations call for the assistance of experienced professionals. 

Bolder Group is a global corporate solutions provider offering comprehensive corporate services based on your unique business needs and market requirements. In partnership with Levari Law, a leading law firm in the Middle East, we offer a comprehensive suite of services to entities in the Middle East and those interested in entering the region. 

Set up your business in the KSA with the assistance of client-focused Bolder experts. Contact our team to discuss your business goals in the Middle East and beyond.  

Disclaimer. Bolder Group does not provide financial, tax or legal advice, and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

Bolder Group refers to the global network of independent subsidiaries of Bolder Group Holding BV. Bolder Group Holding BV provides no client services. Such services are provided solely by the independent companies within the Bolder Group which are each legally distinct and separate entities and have no authority (actual, apparent, implied or otherwise) to obligate or bind Bolder Group Holding BV in any manner whatsoever. The operations of the Bolder Group are conducted independently and have no affiliation with third-party financial, tax or legal advisory firms or corporations.