Business Setup in Saudi Arabia
Setting up a business in Saudi Arabia can be a game-changer for local entrepreneurs and international investors alike.
Saudi Arabia’s strategic location, booming economy, and progressive reforms under Vision 2030 have made it a focal point for global business expansion.
The Kingdom now welcomes foreign investment with pro-business initiatives – including 100% foreign ownership in most sectors, no personal income tax, and a streamlined company formation process.
In this comprehensive guide, we’ll walk you through business setup in Saudi Arabia step by step. From choosing the right company structure and license type to navigating legal requirements, you’ll learn how to start a business in Saudi Arabia efficiently.
We’ll also highlight key considerations like licensing, Saudization (local hiring rules), and how professional support (such as ICBS’s PRO services) can make the process smoother.
Let’s get started on turning your Saudi business idea into a reality!
Why Start a Business in Saudi Arabia?
Saudi Arabia offers a uniquely attractive environment for startups, SMEs, and multinational companies.
Here are some reasons why company setup in Saudi Arabia is so appealing in 2025:
- Pro-Business Reforms: The Saudi government has implemented wide-ranging reforms to ease company formation and attract investment.
Under Vision 2030, regulations have been modernized and procedures streamlined, drastically improving the ease of doing business.
- 100% Foreign Ownership: Foreign investors can now own companies outright in most non-strategic sectors, no Saudi partner required.
This policy, along with the introduction of new investor-friendly company structures, has opened doors for international businesses to operate independently in the Kingdom.
- Tax Advantages: Saudi Arabia imposes no personal income tax on individuals, and corporate tax rates are relatively low (a 20% flat rate on foreign-owned company profits).
Local companies owned by Gulf Cooperation Council (GCC) nationals instead pay a modest Zakat (2.5%).
A 15% VAT applies to goods and services, but there are various incentives and exemptions for priority sectors aligned with Vision 2030 (such as technology and renewable energy).
- Growing Market & Economy: As the largest economy in the Middle East, Saudi Arabia boasts a growing, youthful population with rising purchasing power.
New economic sectors (tourism, entertainment, fintech, etc.) are emerging rapidly. The government is investing heavily in mega-projects and infrastructure, creating opportunities for businesses in diverse industries.
- Infrastructure & Support: Businesses benefit from modern infrastructure, political stability, and government support programs. There are special economic zones offering duty-free access and subsidized facilities.
Saudi authorities also provide after-care for investors, from help with expansions to fast-track visa services for key personnel.
Choosing the Right Business Structure in KSA
One of the first decisions in the Saudi Arabia company formation process is selecting a suitable legal structure.
Your business structure will determine ownership rules, liability, and compliance obligations. Saudi Arabia offers a variety of business structures for both local and foreign entrepreneurs:
- Limited Liability Company (LLC): The LLC is the most common format for company setup in Saudi Arabia, especially for foreign investors. It can have 1 to 50 shareholders and offers limited liability protection.
LLCs are relatively quick to form and flexible for most commercial and service businesses.
- Joint Stock Company (JSC): A JSC is suitable for larger ventures or those planning to raise capital publicly or privately.
It allows share issuance and typically requires a higher initial capital. Traditionally, JSCs needed a board of directors and significant capitalization, but recent legal changes introduced a Simplified Joint Stock Company (SJSC) with no minimum capital requirement.
This new SJSC structure (under the 2023 Companies Law) gives startup founders many JSC benefits with fewer formalities, making it an attractive option for high-growth businesses.
- General Partnership or Limited Partnership: These structures involve two or more individuals or entities sharing ownership.
While they are recognized in Saudi Arabia, partnerships are less common for foreign investors because at least one partner must be Saudi.
Liability can be unlimited for general partners, so most entrepreneurs prefer an LLC or corporation for risk protection.
- Sole Proprietorship: This is a single-owner business where the owner is personally liable.
In Saudi Arabia, sole proprietorships (establishments) are generally limited to Saudi or GCC nationals. They are simpler to set up for local small businesses but not an option for foreign individuals.
- Branch of a Foreign Company: Instead of creating a new local entity, a foreign company can establish a branch office in KSA.
A branch is an extension of the parent company, allowed to earn revenue in Saudi Arabia. Branches still require a MISA license for foreign firms and must focus on activities the parent company engages in.
This option is useful for established companies looking to expand operations while retaining the same legal identity.
- Representative Office (Technical & Scientific Office): This is a non-commercial office type for foreign companies to have a presence in Saudi Arabia.
A representative office cannot engage in direct trading or profit-making; it can only conduct market research, support, or promotional activities for the parent company.
It’s a good option if you want to explore the market or liaise with local customers without full operations.
Note: Saudi Arabia’s updated Companies Law (effective 2023) has increased flexibility for businesses. In addition to introducing the simplified JSC, it allows single shareholder LLCs and generally reduced bureaucracy. Choosing the right structure depends on your business size, ownership preferences, and growth plans. Most foreign entrepreneurs opt for an LLC due to its simplicity, unless a branch or larger corporate form better suits their strategy.
Types of Business Licenses in Saudi Arabia
When planning a company setup in Saudi Arabia, understanding the types of business licenses available is crucial for compliance and smooth operations.
Saudi authorities broadly classify business licenses into two tiers: General Licensing and Special Licensing. The general category covers the main sectors of commercial, professional/service, industrial, agricultural, real estate, and media/publishing businesses.
The special category covers niche or purpose-specific licenses such as temporary project-based licenses and various liaison or headquarters offices.
In the following sections, we’ll break down each category and license type with clear definitions, scopes of activity, and key eligibility or application notes – all presented in an informative yet reader-friendly way.
General Business Licenses
General business licenses in KSA are the standard licenses required for most common business activities.
These licenses enable companies to operate in broad sectors of the economy, from trading and services to manufacturing and agriculture.
Below are the major license types under general licensing, each corresponding to a particular range of business activities:
- Commercial License (Trading License): Required for businesses engaged in trading activities – buying and selling goods, retail or wholesale.
Foreign investors seeking a 100% foreign-owned trading company may face additional conditions (such as higher minimum capital and prior international experience).
- Professional/Service License: For service-oriented businesses and professions.
This covers a wide range of activities – e.g. consulting, IT services, marketing agencies, engineering services, etc. – allowing foreign companies to provide services in Saudi Arabia.
- Industrial License: Needed for manufacturing or industrial projects. Companies must also obtain approvals from the Ministry of Industry and meet certain capital requirements for heavy or light manufacturing.
- Agricultural License: For businesses involved in agriculture, farming, or agri-tech. Saudi Arabia issues these to support food security and agricultural development projects.
- Mining License: For exploration or mining of natural resources (minerals, metals).
This sector is regulated by the Ministry of Industry and Mineral Resources, and foreign participation is permitted with the appropriate license.
- Real Estate License: Required for companies engaging in real estate development, investment, or management.
- Technical and Scientific Office License: Aimed at foreign companies setting up a Saudi office purely for support, R&D, or technical coordination, without direct sales.
- Media, Publishing, and Other Specialized Licenses: Activities like publishing, advertising, telecommunication, transportation, education, healthcare, etc., may require additional special licenses or permits from their respective regulators.
Special Business Licenses
In addition to the standard licenses for commercial and industrial activities, Saudi Arabia offers special licensing options designed for specific purposes or unique business scenarios.
These Special Licensing categories cater to situations that don’t fit the typical trading/service company mold – often they are temporary, limited in scope, or meant for representational offices rather than full-fledged commercial operations.
Special licenses include things like project-specific licenses for foreign contractors, liaison offices for foreign companies or governments, and regional headquarters establishments.
Below, we outline the main special license types, along with their definitions, uses, and key conditions.
- Temporary Government Contract License (Project-Specific License):
A Temporary Government Contract License is a special license granted to foreign companies that have secured a contract with a Saudi government entity (or a semi-government agency) to perform a specific project.
This license enables the foreign company to legally operate in Saudi Arabia only for the execution of that particular contract, essentially functioning as a project-based work permit for the company.
- Scientific and Technical Office License (Foreign Company Liaison Office):
A Scientific and Technical Office License is a special license that permits a foreign company to open a non-commercial representative office in Saudi Arabia for specific limited purposes.
Often referred to as a “technical and scientific services office” or simply a liaison office, this setup allows the foreign firm to have a physical presence in the Kingdom without engaging in any direct business activities that generate income.
- Economic and Technical Liaison Office License (Foreign Government Office):
An Economic and Technical Liaison Office License is a unique category of license intended not for private companies, but for foreign government agencies or government-backed organizations that wish to establish a representative office in Saudi Arabia.
These offices are essentially outposts of foreign governments (or their economic development arms) within the Kingdom, aimed at fostering economic, technical, or cultural cooperation.
- Regional Headquarters (RHQ) License (Multinational Corporations):
The Regional Headquarters (RHQ) License is a special license designed for multinational companies that want to establish their regional base of operations in Saudi Arabia.
In recent years, the Saudi government has actively encouraged global companies to set up their regional headquarters in the Kingdom (particularly in Riyadh) as part of its Vision 2030 economic diversification and development plans.
Step-by-Step: How to Start a Business in Saudi Arabia
Once you have a clear business plan, structure, and license type in mind, it’s time to navigate the company formation process.
Setting up a company in Saudi Arabia involves several stages – from initial approvals to registration and post-launch compliance.
Below is a step-by-step guide to Saudi Arabia company formation:
- Plan Your Business and Select a Structure: Begin with a solid business plan. Determine your company’s activities, choose an appropriate legal structure (e.g. LLC, branch, etc.), and decide on the ownership distribution.
This foundational step will guide all the subsequent actions and paperwork. Make sure to also choose the region or city in KSA that fits your industry (for instance, Riyadh for finance or tech, Jeddah for trade, Eastern Province for oil & gas support, etc.).
- Choose a Company Name: Pick a unique name for your company that complies with Saudi naming regulations.
The name should not conflict with any existing registered names and must not include prohibited words (like certain religious terms or foul language).
- Prepare Required Documents: Gather and notarize the necessary documents for company setup.
Key documents typically include passports and IDs of owners, a resolution or board decision (for corporate shareholders) to set up the Saudi entity, and the parent company’s certificate of incorporation if opening a branch.
Foreign documents must be attested and legalized by the Saudi Embassy in your home country. You’ll also need to draft a Memorandum of Association (MoA) or Articles of Association (AoA) for the new company, outlining the business activities, capital, and ownership structure.
- Obtain Initial Approval – MISA License: If you are a foreign investor (or a foreign company expanding to KSA), you must apply for an investment license from MISA.
This involves submitting an application with your business plan, corporate documents, and choosing the license category (service, commercial, industrial, etc.).
MISA may require evidence of your company’s track record and financial stability (e.g. audited financial statements for the past 1-2 years).
Startups can instead apply for an Entrepreneurship License, which may require a support letter from a Saudi incubator or investor. MISA’s approval process is efficient – often around 10 days for many license types.
Once approved, you’ll receive a one-year renewable investment license allowing you to proceed with incorporating the company. (Local Saudi entrepreneurs do not need MISA and can skip to the next step.)
- Draft and Notarize the Articles of Association: With initial approvals in hand, work with a public notary or the Ministry of Commerce to formally notarize your company’s Articles of Association (or corporate charter).
This document will list the shareholders, capital, and company rules. Saudi Arabia now permits 100% foreign-owned LLCs, so your AoA can list the foreign investor as sole shareholder if applicable.
- Obtain the Commercial Registration (CR): Submit all required documentation to the Ministry of Commerce to register your company and obtain a Commercial Registration (CR) certificate (known in Arabic as Sijil Tijari).
The CR is the formal incorporation certificate of your company in Saudi Arabia – similar to a certificate of incorporation.
Upon issuance, your company becomes a legal entity. You will also register your company with the local Chamber of Commerce and pay the chamber membership fee as part of this stage.
The Chamber of Commerce registration is required for companies to activate certain services and is usually done simultaneously with the CR.
- Secure a Physical Office and Register the Address: Saudi regulations require companies to have a physical office address.
Once your company is formed, you should lease an office space appropriate for your business activity (even a small flexi-desk or shared office can work for startups, as long as it’s a zoned commercial address).
After signing a lease, register your national address (Wasel) with Saudi Post for your company. The national address registration is mandatory for government correspondence and future account setups.
Tip: If you’re new to Saudi Arabia, a local business service provider can assist in finding a suitable office location and completing the address registration on your behalf.
Post-Incorporation Registrations (Tax, Social Insurance):
With your company now legally established, you must register for ongoing compliance. Sign up with the Zakat, Tax and Customs Authority (ZATCA) to register for corporate tax and Value Added Tax (VAT) if required.
(VAT registration is required if you expect annual revenues above the threshold, currently SAR 375,000.) Saudi VAT is 15% as of 2020.
Also enroll your company with the General Organization for Social Insurance (GOSI) to manage social insurance for any Saudi or expatriate employees.
GOSI registration is needed once you start hiring staff, and it’s done online by providing your company details and signing up for an account on GOSI’s portal.
- Register with Labor Ministry and Obtain Work Visas: To hire employees (especially expatriates), your company must register with the Ministry of Human Resources and Social Development (MHRSD) – previously the Ministry of Labor.
This will allow you to access systems for work visas and abide by the Saudization program. Saudization (also called Nitaqat) requires that a certain percentage of your workforce are Saudi nationals, with the exact quota depending on your company’s size and industry.
As a new company, you’ll typically start in the “green” Nitaqat band by hiring at least one Saudi. You should also obtain a work visa and iqama (residence permit) for your General Manager or an assigned representative if they are a foreign national.
The process involves issuing a work visa invitation, the person undergoing a medical exam, and then converting the visa to an iqama after arrival in KSA.
Once the GM has an iqama, they can act on behalf of the company for various administrative matters.
- Open a Corporate Bank Account: With your documentation and licenses in place, the final step is opening a business bank account in Saudi Arabia.
Choose a bank and provide the required documents (CR, Chamber certificate, company seal, owners’ IDs, proof of address, etc.). Banks will often require the presence of the company’s General Manager or an authorized signatory (with their iqama) to complete due diligence.
A Saudi corporate bank account is essential for receiving payments, paying suppliers and salaries, and managing your company’s finances.
Tip: If you engaged a local corporate services firm like ICBS, they can coordinate with the bank and streamline the account opening by pre-verifying requirements.
- Ongoing compliance: After setup, remember to maintain annual license renewals (the MISA investment license is typically renewed each year), file tax returns, renew municipal permits (if any), and continue meeting Saudization targets.
Saudi Arabia’s digital transformation means many renewals and filings can be done online. Still, staying compliant can be challenging if you’re not familiar with local regulations and Arabic-language systems.
This is where engaging PRO services (Government Relations Officers) is invaluable – they handle government paperwork, visa processing, and license renewals on behalf of your company, ensuring you remain in good standing with authorities.
How ICBS Can Help Simplify Your Company Formation in Saudi Arabia
Navigating the Saudi business setup process can be complex, especially for foreigners or first-time entrepreneurs. Professional assistance can save you time and help avoid costly mistakes.
International Corporate Business Services (ICBS) specializes in company formation in Saudi Arabia, offering end-to-end support to get your business up and running smoothly.
Our services include:
- PRO/Government Liaison Services: ICBS’s experienced team of Government Relations Officers will handle all interactions with MISA, Ministry of Commerce, municipalities, and immigration authorities.
From securing your investment license to obtaining visas and meeting Saudization requirements, we’ve got you covered.
- Business Licensing & Registration: We guide you in selecting the appropriate license and legal structure, prepare your documentation, and submit all applications on your behalf.
Our local experts ensure your paperwork is in order for notarization and approval, minimizing delays.
- Banking and Office Setup: Opening a bank account or finding a reliable office space in a new country can be challenging.
ICBS assists with corporate bank account opening and can connect you with trusted real estate contacts for office leasing. We make sure you meet the address registration and capital deposit requirements without hassle.
- Ongoing Compliance Support: Our relationship doesn’t end at inauguration. We provide post-setup services like bookkeeping, VAT filings, and payroll support, as well as managing annual license renewals and any additional permits your business may need.
With our support, you can focus on growing your business while we handle the bureaucratic formalities.
With ICBS as your local partner, company setup in Saudi Arabia becomes a streamlined, transparent, and stress-free experience.
We pride ourselves on professional, personalized service – guiding investors and businesses through Saudi regulations for over 17 years (backed by our parent company The Corporate Group(TCG)).
Whether you’re launching a startup or expanding a multinational branch, our team will ensure you start on solid footing in the Kingdom’s dynamic market.