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According to the foreign direct investment law approved in April 2000, foreigners can have up to 100% ownership in any business in Saudi Arabia after applying for a SAGIA license.
Moreover, projects and companies that are 100% foreign-owned can take a loan from commercial banks as well as Saudi Industrial Development Bank (SAGIA). Here is the process to apply for a SAGIA license.
Who can start a business in Saudi Arabia?
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”.
Article 6 (3) of the Executive Rules of Foreign Investment Act explains “the SAGIA license applicant should be a natural or nominal person who has come to Saudi Arabia for investment”.
It means that people who are already working in Saudi Arabia on an Iqama can also not start a business in Saudi Arabia under the category of foreign investment.
At every point in 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.
Selection of the Sector
Foreign investors can make their plan to any sector they want except a few sectors which are reserved for Saudis and GCC nationals only. Recommended: List of Businesses banned for SAGIA License
Type of SAGIA License
SAGIA has set the minimum capital requirement for each type of license. It is important for you to know about it.
- Service – Maintenance, Restaurants.
- Agriculture – livestock, farms.
- Industrial – Manufacturing.
- Trading – Exports and Imports.
- Real Estate.
- Recommended: Minimum Capital Requirement for SAGIA Licenses
Type of Company
Foreign Investor also needs to decide at this stage about the type of company he is going to register with. For example, Limited Liability Company, Joint Stock Company. Recommended: Selection of Type of Company for the SAGIA License
Name of the Company
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 SAGIA License
Once you have done your homework or the pre-application process is complete, the next step is to apply for the SAGIA license.
SAGIA License Fee
- License Fee: SR 2,000 for 5 years.
- Subscription fee: SR 10,000 for 1 year.
Temporary SAGIA License
If the application is approved, a temporary investment license will be issued with a validity of 3 months. A permanent license will be issued once the entire registration process is completed.
Based on the 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 the 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.
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 a business properly.
Commercial Registration: The newly registered company with the SAGIA license should apply for the chamber of commerce registration within 30 days of issuance of Commercial Registration.
- The Chamber of Commerce registration fee is SR 2,000.
DZIT: All local companies should pay Zakat to the Department of Zakat and Income Tax (DZIT) and foreign companies are required to pay income tax.
- Normal Income Tax Rate on SAGIA companies: 20%
The 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.
GOSI: All employees should register with the General Organization for Social Insurance (GOSI)
Municipality: All companies should register with the 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 the 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.