Saudi Arabia is becoming an increasingly favourable location for foreign investment, with an opportune market and inviting business environment, it is one of the top locations for Middle East investment.
As the government aims to diversify the economy away from oil, Vision 2030 has been the guiding principle to reforms being made. Continual developments are being made to create an attractive environment for foreign investors and making establishing a company in the Kingdom more accessible.
As part of planning to bring your business to Saudi Arabia, there are some key elements you need to consider;
Set up types
The Saudi Arabian General Investment Authority (SAGIA) facilitates entry into the Kingdom with the following license types:
- Limited Liability Company (LLC)
- A LLC is a private equity formed between two or more partners (maximum of fifty) or shareholders who are liable for the company’s debts respective of their contributed capital.
- Single Member Limited Liability Company (SMLLC)
- A SMLLC is an LLC established by one person. This person has complete authority and can assume the position of director, board of directors and general shareholders’ assembly. The owner is liable to the amount of capital placed in the company.
- Joint stock company (JSC)
- A JSC is a company whose capital is divided into negotiable shares. A JSC will have a name indicating its purpose and is managed by a board of directors. The JSC’s memorandum of association limits its’ members to a minimum of three and a maximum of eleven.
- Foreign office branch
- Foreign companies can set up a branch office in Saudi Arabia where the parent company undertakes full liability of the office’s actions.
The most common set up types for foreign investors are the limited liability company (LLC) and the foreign office branch.
Types of investments
Under the set up options, there are a number of investment categories that companies can operate in, each with their own regulations for what activities are allowed:
- Service investments – e.g. contracting, public transport, manpower recruitment agencies, domestic labour hiring, university colleges and regular universities
- Industrial investments – e.g. production processes of importing raw materials, production lines of manufacturing products for export or local sale
- Commercial investments – e.g. facilitate the entry and engagement of foreign enterprises in wholesale and retail activities in the Saudi market
- Entrepreneurial investments – e.g. entrepreneurs who wish to establish pilot enterprises accredited by Saudi universities or business incubators
- Real estate investments – e.g. investment in property
- Engineering consultancy offices – e.g. consultancy-related investments of all types including 100% ownership Saudi-based engineering offices
Relocating your team / recruiting locally – expats
Once businesses have established their company through one of the setup options mentioned above, they will need to build a team, either by hiring locally or relocating employees to the Kingdom. This can be challenging for companies with regulations to keep in mind such as Saudization which is covered in more detail below.
There are two main options for companies looking to hire expats in KSA; relocating your current team to the Kingdom or hiring expats locally. Both will depend on your current Saudization level – your industry and size, and job hiring regulations for the position.
Assuming your company is able to hire expats while remaining compliant to Nitaqat, here are the major differences your company may experience between the two options.
Relocating your team
Relocating your team to Saudi Arabia is an endeavour that requires high investment in time, effort and cost. For any individual moving to Saudi Arabia, relocation requires immense preparation and adjustment such as cultural training, accommodation and school search, a new way of life and language for the majority. This can be a very stressful time but with the proper support, employees are able to adapt well to the changes.
Another consideration with relocating a team member is the time required for adjustment, orientation and settling in. This can cause delays to business operations and is something to factor in when deciding to relocate members or hire expats locally.
Additionally, when companies relocate their team, the company will absorb the cost of relocating the employee. Costs may include; visas, flights, accommodation, transport of personal goods, insurance and import taxes or fees.
Hiring expats locally
For companies to hire expats, they can apply for a single visa for an individual or they can apply a block visa. A block visa grants companies a quota of expats they can hire and is valid for a year.
Companies can hire expats who are already in Saudi Arabia, either an expat who has finished their contract with their current company, or an expat who is transferring their Iqama from one company to another or an expat from a company with a low or non-compliant level of Saudization.
Hiring an expat who understands the customs of doing business in Saudi Arabia and is familiar with laws and regulations can be a great asset for a company that has just relocated to the Kingdom. To hire an expat in this way, the company would need to ensure they are in mid green level or higher compliance in Saudization.
Saudization is a crucial part of doing business in Saudi Arabia. It is the nationalization scheme the government created to increase participation of Saudi nationals in the private sector. All companies operating in the Kingdom are required to participate and reach certain levels of compliance. Levels of compliance depend on the company’s industry and size, with mid green, high green and platinum levels of compliance granting companies more benefits.
When relocating or setting up your business in Saudi Arabia, there are many key factors to consider and it can be challenging for companies to know if they are making the best decisions for the future. Support from a trusted local partner gives companies more knowledge, guidance and local expertise so they can make more informed decisions.