100% Ownership for Foreign Investors in Saudi Arabia | Freezoner

If you're considering doing business in Saudi Arabia, you're probably wondering about ownership options, especially when it comes to foreign ownership. In this blog, we’ll cover everything you need to know about 100% foreign ownership in Saudi Arabia, the rules, the benefits, and how to make it work for your business. Let’s dive in!

Does Saudi Arabia Allow 100% Foreign Ownership?

The short answer is yes, Saudi Arabia does allow 100% foreign ownership in many cases. This is a big deal because, historically, foreign investors were required to have a Saudi partner. However, in recent years, the country has opened its doors wider to attract international business and investments. This move is part of the country’s push to diversify its economy and reduce reliance on oil.

Why the Change?

In 2019, Saudi Arabia introduced the Foreign Investment Law which allows for more liberal ownership laws. The law permits foreign investors to own 100% of a business in most sectors, but there are some rules you’ll need to understand.

Which Business Is Most Profitable in Saudi Arabia?

Now that you know you can own 100% of your business, what kind of business should you start? When you open a company in Saudi Arabia, it's crucial to choose a sector with high growth potential. Saudi Arabia has a growing economy, with many sectors seeing impressive growth, such as:

• Technology: With Vision 2030, the Saudi government has pushed to become a leader in tech and innovation. The tech sector offers many opportunities for foreign investors.
• Tourism: With new initiatives like NEOM and plans for a thriving tourism industry, businesses focused on hospitality, entertainment, and leisure are booming.
• Construction & Real Estate: As the country grows and expands, real estate and construction businesses are thriving. There are always opportunities to build and invest.
• Retail and E-commerce: Saudi Arabia has a large, young, and tech-savvy population, making the retail and e-commerce industries very profitable.

The most profitable business will depend on your skills, capital, and the demand in the local market. It’s important to do your research to find the best opportunity for you. 

Saudi Arabia Taxation For Foreigners

Establishing a 100% foreign-owned business in Saudi Arabia offers exciting opportunities, but it's essential to understand the taxation landscape to ensure compliance and financial efficiency. Here's a concise overview of the key tax considerations for foreign-owned companies in the Kingdom:

Corporate Income Tax

Foreign-owned companies are subject to a corporate income tax rate of 20% on net adjusted profits. This rate applies uniformly across various sectors, with specific exceptions for industries like oil and hydrocarbon production, which are taxed at higher rates.

Withholding Tax (WHT)

When making payments to non-resident parties, certain types of payments are subject to withholding tax:

• Management Fees: 20% WHT
• Royalties: 15% WHT
• Rent: 5% WHT

These rates apply to the gross amount of the payment and are the responsibility of the paying entity to withhold and remit to the tax authorities.

Value Added Tax (VAT)

Saudi Arabia imposes a standard VAT rate of 15% on most goods and services. Businesses are required to register for VAT, charge it on taxable supplies, and remit the collected amounts to the General Authority of Zakat and Tax (GAZT). It's crucial to maintain accurate records and comply with VAT filing requirements to avoid penalties.

Zakat

While Zakat, an Islamic assessment, is primarily applicable to Saudi and GCC nationals, foreign-owned companies may be subject to Zakat on the portion of the business owned by Saudi or GCC shareholders. The Zakat rate is 2.5% of the company's Zakat base, which represents the net worth calculated for Zakat purposes.

Tax Filing and Compliance

The fiscal year in Saudi Arabia runs from January 1st to December 31st. Companies must file their income tax returns within 120 days following the end of the fiscal year. Late filings can result in penalties, including a 1% penalty on revenue for delayed submissions. Additionally, maintaining proper documentation and timely remittance of taxes is essential to ensure compliance and avoid legal complications.

Understanding the tax obligations for a 100% foreign-owned business in Saudi Arabia is vital for successful operations. Adhering to corporate income tax, withholding tax, VAT, and compliance requirements will help in maintaining smooth business functions and fostering positive relations with Saudi tax authorities. Consulting with tax professionals or legal advisors familiar with Saudi tax laws is advisable to navigate the complexities and ensure full compliance.

Requirements for Establishing 100% Foreign Ownership in KSA

Now that you know 100% foreign ownership in Saudi Arabia is possible, you might be wondering how to establish it. Here’s a basic overview of the requirements:

1. Choose the Right Business Activity

Not every industry allows for 100% foreign ownership. Certain activities may require a local partner or a restricted amount of foreign ownership. These restrictions apply to specific sectors like oil and gas, and some industries deemed strategic to the country’s economy.

You can check with the Saudi Arabian General Investment Authority (SAGIA) to determine if your business activity qualifies for 100% foreign ownership.

2. Register with SAGIA

Once you've determined that your business is eligible, the next step is to register with SAGIA, the government agency responsible for overseeing foreign investments. SAGIA helps you with all necessary permits, ensuring that your business complies with local laws.

3. Set Up a Saudi Arabian Branch or Company

After registration, you’ll need to decide how you want to structure and set up your business in Saudi Arabia for a foreign. You can either:

• Open a branch office of your foreign company.
• Establish a limited liability company (LLC) or a joint-stock company.

The exact requirements will vary depending on your business structure, but the good news is you can own 100% of it.

4. Capital Investment

Some sectors may require you to invest a minimum amount of capital to establish your business. The exact figure depends on the business type, so make sure you research and plan your finances accordingly.

5. Get Licenses and Permits

Depending on the nature of your business, you may need specific licenses or permits. This could include health and safety permits, labor permits, environmental regulations, or industry-specific certifications.

Establishing a business in Saudi Arabia with 100% foreign ownership is a game-changer for entrepreneurs. Thanks to the country’s Vision 2030 plan, the investment environment is now more welcoming, offering incredible opportunities for foreign businesses to grow and succeed.

To maximize this potential, it’s essential to research thoroughly, understand the legal requirements, and select the right business sector. With Freezoner by your side, you can simplify the entire process. Our expertise ensures you meet all regulations and set up your business for long-term success in Saudi Arabia. Freezoner is here to help you get started!