Jeddah is considered one of the great business hubs of Saudi Arabia, where many entrepreneurs and investors are interested in setting up their businesses. Jeddah is not only one of the port cities of the kingdom but also the hub of commerce, trade, and tourism.
Thus, due to the city’s strategic location on the Red Sea coast and the Saudi government’s vision set out under Saudi Vision 2030 to diversify the economy by attracting investors worldwide, establishing a business in Jeddah promises an opportunity for growth and stability.
This complete guide will significantly assist in all the procedures, legal compliance, and requirements that must be followed in the region.
Steps to Setup a Company in Jeddah
Step 1: Choosing the Right Business Structure
The first step in establishing a company in Jeddah is to determine the right business structure for it. Your company’s legal structure will determine how your business operates, its liability, and the taxation attributed to it. Saudi Arabia has several business structures for you to decide from:
- Sole Proprietorship: This business is mainly suited for small-sized enterprises and is owned and controlled by one person.
- Limited Liability Company (LLC): An LLC protects personal assets and requires at least one shareholder. An LLC is the most common and sought-after mode of organisation by foreign investors.
- Joint Stock Company (JSC): A structure best suited for large corporations to raise capital by floating shares in the stock market.
- Branch: Businesses can open a branch office in Jeddah and operate under the parent’s name.
- Representative: This is suitable if the business or corporation does not desire to begin commercial operations but simply wants to venture into the market.
Choosing the right legal structure depends on the kind of business, its extent, and the business goals. An LLC in Jeddah is the most preferred option among the available structures, particularly by foreign investors.
Step 2: Obtain a Foreign Investment License from MISA
For foreign investors, the following is required:
- Foreign investment license from the Ministry of Investment of Saudi Arabia (MISA). This license permits foreign nationals and corporations to legally operate within the Kingdom’s borders—this required the shareholder’s copy of their passport.
- Copy of certified Articles of Association
- Proof of financial standing and business experience
After successfully submitting the application, MISA will examine the documents for relevance to Saudi Arabia’s requirements. Once approved, you would be granted a foreign investment license, which would open the way to complete the company registration process with the appropriate authorities in Jeddah.
Step 3: Registration of the Company with the Ministry of Commerce
After the foreign investment license is issued, you are officially authorised to register your company with the Ministry of Commerce. This is integral to giving legal recognition to your business in Saudi Arabia. Steps for registration include the following sub-steps:
- Name reservation: The name of your business must follow Saudi laws and should not contain offensive or misleading names.
- Articles of Association: The Articles of Association must be authenticated by either the Ministry of Justice or an accredited notary.
- Registration with the Jeddah Chamber of Commerce: Every business in Jeddah should register at the local Chamber of Commerce.
After succeeding registration, your company shall be issued a Commercial Registration Certificate, which formally acknowledges the existence of your business in Jeddah and gives you legal rights to conduct operations within the Kingdom.
Step 4: Open a Corporate Bank Account
To commence the operations of your Saudi Arabia company, opening a corporate bank account within a local Saudi bank is necessary. The banks in Jeddah provide customised business accounts for foreign investors, having currency exchange and international transfers among the services, besides business loans. Below are the documents required to open a corporate bank account:
- Commercial Registration (CR) certificate
- Copies of the shareholders’ passports
- Articles of Association
- MISA license
Knowing a reliable bank that will manage your financial operations effectively is only possible by taking quite a few hours to research the available options and then selecting the one that best suits your needs.
Step 5: Obtain Any Required Licenses and Permits
Depending on the business, you may need several other licenses or permits to operate. Certain companies, such as construction, healthcare, retail, and food services, require special approval by specific industries. Examples include:
- Construction and real estate: Obtain permit from the Ministry of Municipal and Rural Affairs.
- Healthcare and pharmaceuticals: Obtain approval from the Saudi Food and Drug Authority (SFDA).
- Trading and retail: Obtain license from the Ministry of Commerce.
The company will be required to obtain the licenses based on the business activity. This will reduce the chances of being penalised and ensure that everything runs smoothly.
Step 6: Recruiting Employees and Work Visas
Once you have registered your business, you may now begin recruiting staff. Saudi Arabia’s labour law requires you to comply with the Saudisation provisions. This means that a portion of your workforce must be Saudi citizens. Foreigners can also be employed, subject to the existence of work visas in the facility. To use foreign labour, you will need to:
- Provide a copy of that employee’s employment contract.
- Obtain your employee’s health insurance.
- Give an invitation letter from your company to the employee for visa processing.
- Registration with GOSI for social insurance coverage.
- Be aware of all labour laws regarding employee benefits, working hours, and procedures for terminating contracts.
Step 7: Tax Obligations Registration
Some tax obligations for a Saudi Arabian company include:
- Saudi Arabia imposes Value-Added Tax (VAT) at 15% on all goods and services. If your company’s turnover exceeds SAR 375,000 for a year, then you are required to register for VAT with the Zakat, Tax, and Customs Authority (ZATCA). Even if your turnover is less than this amount, you can voluntarily register in the event of an upswing of business.
- Charge VAT on taxable goods and services and file regular VAT returns. These VAT returns can be done monthly or quarterly.
- Maintaining a record of all sales, purchases, and taxes paid.
- It is imperative to be in accord with the tax rules of Saudi Arabia to prevent any form of penalty.
Step 8: Compliance
Once the company is incorporated, it is crucial to continue complying with the ongoing legal requirements. This includes:
- The commercial registration renewal
- Annual renewal of the Commercial Registration
- File annual account financial and tax
- Complying with the labour law
The Saudi government improves its regulations to make the business climate even more favourable for growth, so it is wise to keep abreast of changes in the law.
Conclusion
Setting up a business in Jeddah allows foreign investors to keep pace with the booming Saudi Arabian market. Combined with the Kingdom’s intent on constantly implementing economic reforms and Jeddah’s strategic location, this city has immense industry openings. Thus, with the steps provided in this guide, it will be possible to successfully establish your company and use all the opportunities that Jeddah offers.
For more information on Jeddah company setup, please contact the experts at Gatestone Group. We will provide you with a personalised response to guide you through the intricate process of opening your business in Saudi Arabia, allowing for its smooth and successful launch.