Starting a business in Saudi Arabia

Economic diversification is a major part of the country’s efforts, guided by its Vision 2030 programme. First launched in 2016, Vision 2030 focuses on shifting the economy away from oil dependency and promoting other promising sectors including manufacturing, tourism, and technology.

Progress so far reflects this commitment, with the non-oil sector hitting 50% of the country’s gross domestic product (GDP) in 2023. With more reforms underway, this may offer a range of opportunities for businesses, making it easier to invest, operate, and expand in Saudi Arabia.

In 2022, the Saudi Council of Ministers approved the new Companies Law, which came into effect on 19 January 2023. This updated law brought significant changes to the business landscape in Saudi Arabia, including the addition of a new entity type known as the simple joint stock company (SJSC). The law also eases several requirements for limited liability companies (LLCs) in Saudi Arabia, making the business setup process more accessible.

More recently in January 2024, Saudi Arabia introduced a tax incentive programme offering multinational companies (MNCs) a 0% corporate income tax and withholding tax rate on regional headquarters (RHQ) activities for 30 years. To qualify, MNCs intending to conduct business with Saudi government entities are required to establish their RHQ within the country.

Put together, these developments may create a stable, business-friendly environment designed to draw in international companies and support local growth.

With over half the population under the age of 25, Saudi Arabia presents considerable workforce potential. The country also introduced the National Training Campaign “Waad” initiative, aiming to provide 1.16 million training opportunities by the end of 2025.

It’s worth noting that new amendments to the Saudi Labour Law may make the work environment here more attractive and boost the overall labour market. Effective from February 2025, the changes enhance employee rights and bring local standards closer to global norms. For example, employer-paid maternity leave will be extended from 10 to 12 weeks. This is good news if you have plans to attract both local and international talent.

By starting a company in Saudi Arabia, you’ll also be able to reach locations like Dubai and the wider United Arab Emirates (UAE) within a few hours’ flight. Located near Europe, Asia, and Africa, Saudi Arabia provides you with unique access to other regional markets. This strategic position makes the country an attractive base for local company incorporation and a gateway to more expanding economies for the years ahead.

Saudi Arabia collaborates closely with other Gulf nations as a member of the Gulf Cooperation Council (GCC). Established in 1981, the GCC is a political and economic alliance that comprises of Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman, and Bahrain. Together, these countries form a bloc that promotes cooperation in trade and other areas. This may enable your business to expand more smoothly into other GCC countries.

Additionally, Saudi Arabia benefits from GCC free trade agreements with the European Free Trade Association (EFTA) states as well as countries like Singapore and New Zealand. These agreements significantly reduce or eliminate tariffs on goods, services, and capital, making it easier for you to broaden your reach. By setting up a company here, you’ll also gain access to a consumer base of over 60 million people across the Gulf region.

A limited liability company (LLC) allows you to engage in a range of commercial activities while providing liability protection. You and your partners are only accountable for company debts up to the amount of your respective shares. This structure makes it an attractive choice for those who want to do business in Saudi Arabia without risking personal assets beyond their investment.

An LLC can be set up by one or more individuals or entities. The minimum capital requirement may vary based on the type of business activity.

If you’re considering establishing a business in Saudi Arabia, a joint stock company (JSC) is a viable option, particularly if you plan to raise capital or attract multiple investors. Your shareholders’ financial responsibility will be capped at the value of their subscribed shares, keeping personal assets separate in the event of debts. The company itself will be solely responsible for any debts or obligations arising from its business activities.

Starting a JSC in Saudi Arabia requires an initial capital of at least SAR 500,000, with a minimum of one-quarter paid up at incorporation. Additionally, a JSC must be managed by a board of directors with at least three members.

Another option is to set up a simple joint stock company (SJSC) in Saudi Arabia. Unlike the formation of a JSC, the SJSC has no minimum capital requirement. This is a more flexible business structure that can cater to start-ups and growing businesses. An SJSC may be established by one or more individuals, with management options that include either a president, single manager, multiple managers, or a board of directors.

In a general partnership, two or more individuals or entities come together, each taking on personal and joint responsibility for the business’s debts and obligations. This means that you and any other partners share liability, covering all company debts which can extend to personal assets if needed.

This structure allows for full involvement in decision-making and management in Saudi Arabia, making it suitable if you prefer a straightforward business setup process and are comfortable sharing the risks and responsibilities.

On the other hand, a limited partnership offers a bit more flexibility in terms of liability. In this setup, there are two types of partners. The first includes at least one partner who, like in a general partnership, is personally and jointly liable for the partnership’s debts with their personal assets. The second consists of at least one silent partner who is only liable up to the amount they contributed to the partnership’s capital.

This structure allows you to bring in partners who contribute financially but are not involved in management or daily operations. A limited partnership could be a good option if you want to limit liability for certain partners or attract investors who prefer a passive role in the business.

For foreign investors looking to enter the Saudi market, establishing a branch of your existing company is an option worth considering, especially if you prefer not to form a new legal entity. By setting up a branch, your foreign-registered company can operate directly in Saudi Arabia, enabling you to carry out business activities under the same corporate umbrella as the parent company.

Keep in mind, however, that a branch does not have its own legal identity in Saudi Arabia. This means that your parent company is fully liable for any debts or obligations the branch incurs while operating here.