Navigating Business Setup in Saudi Arabia with MISA: A Strategic Guide for 2024

Establishing a business in Saudi Arabia can be complex, but it presents significant opportunities for foreign investors. Within just four months, a foreign entrepreneur can wholly own a Saudi limited liability company (LLC) and legally operate in the Kingdom. This includes the ability to:

1. Issue sales invoices
2. Sign legal contracts
3. Hire staff
4. Secure office premises

Our team assists multinational clients in obtaining foreign business license approval from the Ministry of Investment of Saudi Arabia (MISA), formerly known as the Saudi Arabian General Investment Authority (SAGIA). A MISA license allows foreign investors to operate independently in the local market without the need for a Saudi sponsor. We recommend MISA registration as the optimal entry strategy for Saudi Arabia, favored by most of our clients.

However, establishing a business in Saudi Arabia involves significant costs, including fees for:

1. Government services
2. Local lawyers and accountants
3. Notarizations and embassy attestations
4. High paid-up share capital requirements

To help our multinational clients prepare for and navigate the business setup process in Saudi Arabia, we have summarized the paid-up share capital requirements and alternative strategies below.

Steps for registration and issuing a MISA License:

Step 1: Preparation of documents, including the investment and Saudization plan i

Step 2: MISA foreign investment license issuance

Step 3: Securing the certificate of registration

Step 4: Corporate bank account opening and deposit of paid-up share capital

Step 5: Post-incorporation registrations including tax and municipality registration – Our Clients can now issue invoices, sign contracts, and hire employees;

Step 6: Securing an Iqama visa for the business owner;

Step 7: Converting the capital account to an operational corporate bank account and appointing our Client’s preferred bank signatory;?

Paid-Up Share Capital Requirements

Foreign investment licenses in Saudi Arabia require substantial paid-up share capital, which must be deposited into a Saudi corporate bank account before company formation. For clients unable to meet these requirements, we recommend considering alternative options such as:

a) Registering a Commercial Agency Agreement b) Establishing an entity in Dubai, Bahrain, or another GCC member country

Paid-up share capital levels are as follows:

Type of

Comments

Required paid-up share capital for a Service license, US$134,000

Required paid-up share capital for a License? US$7.2M & a 25% Saudi national;

??or ??US$8M to benefit from fully foreign ownership? Increasing the investment to US$54M within 2 years from company registration

Required paid-up share capital for a License Industrial (manufacturing) is US$267,000 to US$1,334,000 however, MISA will fix the exact paid-up share capital during company formation, after reviewing the company’s 10-year investment plan;

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Restricted Business Activities for Foreign Investors

A MISA LLC can operate in most industry sectors except for the following:

1. Oil exploration, drilling, and production
2. Manufacturing of military equipment, devices, and uniforms
3. Manufacturing of civilian explosives
4. Catering to military sectors
5. Security and detective services
6. Real estate investment in Makkah and Madina
7. Tourist orientation and guidance services related to Hajj and Umrah
8. Recruitment and employment services, including local recruitment offices
9. Printing and Publishing
10. Commission agents internationally classified at CPC 621
11. Audio-visual and media services
12. Land transportation services, excluding intra-city passenger transport by trains
13. Services provided by midwives, nurses, physical therapy services, and quasi-doctoral professions

Investment and Saudization Plan

Before submitting a pre-approval application to MISA, we assist clients in preparing essential documents, including an investment and Saudization plan and a complete registration application. These documents are crucial for the licensing process and must detail:

a) The business activities to be conducted in Saudi Arabia b) The client’s professional experience in other countries, including other subsidiaries c) The nature and size of the investment activity in Saudi Arabia d) A 10-year financial projection plan e) Manpower requirements, training provided, and Saudization levels f) The benefits and advantages of the proposed business activity to the Saudi economy, including social impact

MISA prioritizes the registration of large entities. Thus, the more substantial the client's operations in their country of origin and the more significant their contribution to the Saudi economy, the higher the likelihood of obtaining foreign business license approval. This reduces the chances of MISA requesting:

a) A higher paid-up share capital than initially stated b) The appointment of a local joint venture partner:

Navigating the business setup process in Saudi Arabia can be daunting, but with the right guidance and preparation, it offers vast potential for foreign investors. We are committed to supporting our clients every step of the way, ensuring a smooth and successful entry into the Saudi market.