We know that expatriates living in Saudi Arabia cannot operate a business legally unless they get a license from Saudi Arabian General Investment Authority (SAGIA). The law for foreign direct investment in Saudi Arabia has brought significant changes in the traditional sponsorship system in Saudi Arabia and new trends to the business environment in Saudi Arabia. The law for foreign direct investment was approved in April 2000 according to which foreign investment can have up to 100% shareholding in any business. Traditionally, only Saudis could start and conduct business in Saudi Arabia. Moreover, projects and companies which are 100% foreign owned can take a loan from the commercial banks as well as Saudi Industrial Development Bank. In this article, I am going to share the detailed procedure to apply for SAGIA license in Saudi Arabia.
Who can start a business in Saudi Arabia? According to Article 1 of the foreign investment Act in Saudi Arabia, defines the investor in this way, “a Foreign Investor is a natural person who is not of Saudi nationality or a corporate person whose partners are not all Saudi”. It shows that Saudi National cannot start business in Saudi Arabia as foreign investor.
Article 6 (3) of the Executive Rules of Foreign Investment Act explains “the license applicant should be a natural or nominal person who has come to the Kingdom for investment”. It means that people who are already working in Saudi Arabia on worker’s visa can also not start a business in Saudi Arabia under the category of foreign investment.
Pre-application Preparation: At every point of time, the only contact person for foreign investors is SAGIA. Foreign investors must organize their business plan and support documents before beginning the Investment License and Commercial Registration process.
Foreign investors can make their plan to any sector they want except few sectors which are reserved for Saudis and GCC nationals only. Recommended: List of Businesses banned for SAGIA License (reserved for Saudis and GCC nationals)
SAGIA has set the minimum capital requirement for each sector. It is important for you to know about it. Recommended: Minimum Capital Requirement for different types of SAGIA Licenses
Foreign Investor also needs to decide at this stage about the type of company he is going to register. For example, Limited Liability Company, Joint Stock Company. Recommended: Selection of Type of Company for the SAGIA License
Foreign Investors must make sure that they have selected the name of the company. Recommended: 11 SAGIA Rules to select the name of your Business
Apply for the License: Once you have done your homework or pre-application process is complete, next step is to apply for a license. Foreign Investors must make sure that they have selected the type of license they need. Different categories of licenses are Service, Industrial, Trading, Real Estate, and Agriculture.
After completing the investment license application form, it should be submitted for approval to the SAGIA. If this application is approved, a temporary investment license will be issued with the validity of 3 months. A permanent license will be issued once the entire registration process is completed.
700 File: Based on temporary investment license issued by SAGIA to the foreign investor, they can open a “700 File” in the labor office situated within the business center where SAGIA office is located. These 700 files will enable the entity to convert visit visas of the foreign investors into Iqama. Moreover, a foreign investor would be able to issue some visas for other partners with 700 files.
Commercial Registration: After opening the “700 file” with Labor Office, the foreign investor is all set to go for Commercial Registration. There are several requirements of the commercial registration which have been explained in detail in this link. The application for commercial registration will also be made in the business center where the office of SAGIA is situated. After commercial registration, your entity is legally registered. However, there are some more requirements to start business properly. Recommended: Procedure to get Commercial Registration (CR) of the company in Saudi Arabia
Chamber of Commerce: Newly registered company under SAGIA should apply for the chamber of commerce registration within 30 days of issuance of Commercial Registration. The registration fee for the Chamber of Commerce registration is SR 2000.
Department of Zakat and Income Tax: All local companies should pay Zakat to the Department of Zakat and Income Tax (DZIT) and foreign companies are required to pay income tax. Income tax rate varies from industry to industry. The company should register with DZIT to receive the certificate of commencement of business. Now your company is all set to start a business.
General Organization for Social Insurance: All employees should register with the General Organization for Social Insurance (GOSI)
Registering with Municipality: All companies should register with municipality to register with Labor Office
Labor Office: After receiving the municipality license, a company is ready to get registered with Labor Office. Registering with Labor office will allow the company to apply for visas for manpower.
Repatriation of Money from Saudi Arabia: A common feature in most of the foreign direct investment laws is the restriction on repatriation of money or restrictions on foreign exchange. However, this restriction is not there in the Saudi Foreign Direct Investment rule. Saudi Government allows companies to transfer money to their own countries as they want to. Moreover, new Income Tax Law on passed in January 2004 which reduced the rate of tax on the foreign companies to 20% from 45%. Saudi Arabia General Investment Authority (SAGIA) is responsible for implementing foreign investment policies in Saudi Arabia. They are authorized to issue investment license, visas, residence permits and other related documents to foreign investors.