What is Company Registration in Saudi Arabia?
The economy of country is dependent on oil and has strong government control over major economic activities. Its economy is largest in the Arab world. The country is considered as an "energy superpower". It has third highest value of natural resources. Saudi oil reserves are the second largest in the world and it is the world's leading oil exporter and second largest producer. 100% foreign-owned businesses were allowed in the Kingdom. With no minimum capital required, procedures for starting a business have been relatively streamlined. There is no mandated minimum wage, but wage increases have exceeded labor productivity. Oil prices must be at least $106 per barrel for Saudi Arabia to maintain its historically generous subsidies, for which Saudi nationals have paid zero taxes. Foreign investment is screened by the government, and state-owned enterprises distort the economy. Direct purchase of shares in Saudi companies listed on the stock exchange has been permitted since 2015, opening the market to foreign institutional investors. The reason to start business in Saudi Arabia is a well-planned investment of foreign investors due to the mobilization and proper utilization of resources. It is advisable to have business set up in Saudi Arabia.
Business Type & Legal Forms
As like other countries, Saudi Arabia is also having different form of business to register and work on country. There are altogether six types of form of business for resident and non-resident to start up in Saudi Arabia.
Each one is brief in as below:-
- Sole Proprietorship
It is a single partner company having no minimum capital requirement. However, the individual entrepreneur is liable for all business debts and personal assets can be taken.
It is further extended in two types i.e. General (SharikatTadhamou) and Partnership Limited by Shares (Ashom).
For General, the minimum partners should be 2 with Minimum share capital of SAR 5, 00,000 where liability is unlimited of partners.
For Limited, a number of partners range from at least 2 to maximum 50 with minimum capital of SAR 1 million. In this type of partnership, at least one partner must have an unlimited liability. Liability of other partners is limited to the amount contributed.
It is further classified in Private, Public and Limited Liability Company.
For private, it required at least 5 partners with minimum capital of SAR 2 Million. Liability is limited to amount contributed.
For public, it also required at least 5 partners with minimum capital of SAR 10 Million. Liability is limited of partners to the amount contributed.
For Limited Liability Company, number of partners required is at least 2 and a maximum 50 having share capital of SAR 1, 00,000 (minimum) where liability is limited to the amount of contribution by the partners.
Further for foreign entity, country has provided to develop branch, representative office and subsidiary to set up in Saudi Arabia. Another aspects is also there to be in Saudi Arabia i.e. Commercial Agency set up in Saudi Arabia as per the terms and condition prescribed by law of country.
Registration Procedure in Saudi Arabia
The most popular company in Saudi Arabia is Limited Liability Company (LLP) so it’s better to discuss on step by step registration process of this kind of company.
First: Reservation of company name which is valid for 2 months and can also done completely online through website of Ministry of Commerce and Industry.
Second: Submit the Articles of Association (AOA) to Ministry of Commerce and Industry for authentication. Once approved by the companies department of the Ministry of Commerce and Industry, the approved documents bearing the stamp of the Ministry and the official correspondence referring the applicant to the notary will have to be collected personally by applicant.
Third: receive the Ministry of Commerce and Industry’s stamp on the articles of association (AOA) and notarize the AOA with a Notary public.
Fourth: open an “under-formation” bank account. After obtaining the certificate of registration from companies department of the Ministry of Commerce and Industry, the company founders go back to the bank to unblock their capital deposit and activate their bank account.
Fifth: obtain a business location license from the Municipality and register with post office “Wasel”.
Sixth: pay the registration fee at the bank window within the same building of the unified center. It takes one daytime and cost around SAR 500 registration fee and SAR 650 for publication of summary articles of association.
Seventh: Submit the approved documents and obtain the Certificate of Registration. It will be issued within 2 days of application provided the requirement is fulfilled and all the documents is correct.
Eight: make a company seal which cost around SAR 50 and takes a daytime.
Ninth: Designate company signatories and pay the chamber of commerce membership fee, which cost around SAR 2,000 and takes one day to get registration.
Tenth: Registry with Ministry of Labor. It is required as per Labor law applicable in country. The applicant has to file certificate of registration, AOA, certificate of chamber of commerce with attested signatory and so on.
Eleventh: register with the General organization for social insurance. It is required to as per Saudi Arabia applicable law.
Twelfth: last but not the least company has to take registration with the Department of Zakat. Zakat is religious tax assessed based on taxable income of certain assets. It takes around 2-3 days to complete the entire process subject fulfillment of all the required documents and compliance.
Country has income tax rate of 20% of net adjusted profit of corporate. Withholding taxes (WHT) rates are between 5% and 20%. Zakat is charged on the company's Zakat base at 2.5%. Natural Gas Investment Tax (NGIT) rate applicable is 30% if the IRR is 8% or less. The rate increases progressively up to 85% if the IRR equals or exceeds 20%. Income from oil and hydrocarbon production is highest in country which is in between 50% to 85% effective from 1 January 2017 as per the latest amendment in Income Tax of Country.
On a concluding fact, country has wide opportunity and scope for the exploration of resources other than oil and gas also. Other industry like infrastructure, finance, communication and so on are still behind the ultimate utilization of resources. It is advisable to have physical presence in Saudi Arabia for trade and business.