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Saudi Arabia company registration

Healy Consultants Group PLC
07 March, 2014

Over the past few years, Saudi Arabia has emerged as a great place to do business in the Middle East and North Africa region. Its growing economy is creating tremendous opportunities for investors all over the world. As an example, Saudi Arabia has been the UK’s largest trading partner in the Middle East in 2012. Saudi Arabia company formation offers the following advantages:

1.    Foreign companies are allowed to bid for government contracts and operate in the Kingdom without a Saudi agent or partner;

2.    The Saudi Industrial Development Fund makes interest-free loans to industrial companies of up to 50% of the total cost of the project, including pre-operating costs, investment in fixed assets, and working capital. However, a 50% loan requires Saudi participation which is not less than 50%. If Saudi participation is lower, the loan is reduced proportionally;

3.    To reduce the Kingdom’s dependence on the export of crude oil as the major source of income, the Saudi Government welcomes foreign company registration providing i) labor saving equipment and services ii) staff training services iii) all areas of health, personnel, and services iv) food industries utilizing locally abundant agricultural products v) metal manufacturing vi) vehicle manufacturing and vii) solar technologies;

4.    The Kingdom remains by far the largest Arab market, and is one of the world’s main trading nations in terms of goods and services. Saudi Arabia still depends on imports for most of its manufactured items. Consequently, local residents are in demand of international products and services and are willing to spend on quality products;

5.    Foreign companies enjoy exemption from customs duties on the import of machinery, equipment, tools, and spare parts for industrial projects;

Foreign investors should consider the followings before starting their business in Saudi Arabia:

1.    Company registration in Saudi Arabia requires a minimum of US$133,000 paid up share capital for a limited liability company;

2.    One of the biggest business challenges is government red tape, bureaucracy, and corruption. When there is ambiguity about Saudi law, it gives rise to corruption and unnecessary delays in executing deals in the country;

3.    A Saudi company suffers corporation tax 20%. Capital gains are taxed at 20%;

4.    Foreign companies cannot import goods for resale and direct commercial marketing within the Kingdom to Saudi nationals. A Saudi agent or distributor must be appointed. Only Saudi nationals and 100% Saudi-owned companies may import goods. Importers must be licensed by the Ministry of Commerce;

5.    Saudi Arabian business practices and laws still favor Saudi Citizens. Saudi litigants have an advantage over foreign parties in almost any investment dispute because of their first-hand knowledge of Saudi law and culture. The dispute settlement process favors local parties in a dispute;

6.    Disputes with Saudi partners causes serious problems for foreign investors. Saudi partners have blocked foreigners’ access to exit visas, forcing them to remain in Saudi Arabia against their will. In cases of alleged fraud, foreign partners may also be jailed to prevent their departure from the country while awaiting police investigation or adjudication of the case. Courts can impose precautionary restraint on personal property pending the adjudication of the case;

7.    The government tenders in procurements favor i) Saudi Arabians ii) companies with Saudi nationals at least 51% of the capital iii) products of Saudi Arabian origin;

Despite the hurdles aforementioned, recent economic reform and growing market sectors are transforming Saudi Arabia’s economy making it less dependent on oil and gas. This will open more business sectors for foreign investments in the near future. 

Tags: Economy | Business

About the Author

Healy Consultants Group PLC

Since 2003, Healy Consultants assists international Clients with company incorporation services worldwide. Our services include: company registration, opening of corporate bank account, accounting and tax services, legal services, jurisdiction comparisons...more.

To inquire more information about global business set up; call us on +65 6735 0120 or email us at email@healyconsultants.com


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