If you have a business and your interest is to expand it, believe me, the Saudia subsidiaries are the way to do so. Since they offer multiple benefits for those who wish to invest in their territory, in addition to having an excellent market to distribute it. In this way, your business will increase its income effectively; while you would be collaborating with the country’s economy.
In this article, we will be talking about the Saudia subsidiaries. To complete the infrastructure megaprojects that will increase the country’s per capita income and diversify its economy, the Saudi government hopes to attract foreign investment. Here you will learn how to invest in a good field and make the most of you subsidiary.
- What is a subsidiary?
- Why do companies open subsidiaries in other countries?
- How to set up a subsidiary in Saudi Arabia?
- What are legal requirements to establish your company?
- Permits and licenses for a company by industries
- Benefits of subsidiary in Saudi Arabia
- Are you interested in getting information about subsidiary in Saudi Arabia?
1. What is a subsidiary?
In economics, subsidies help public authorities grant to certain citizens, mainly to provide access to basic goods and services. In this sense, the Administration can lower the price of a product for the general public because it is strategic or basic for the population.
For example, in some countries foods such as bread or chicken are have subside. This is so that the suppliers can lower their prices but not lose income since the administration provides them with a subscription. It also occurs in cases such as light or heating.
1.1 How are subsidiaries in Saudi Arabia managed?
The Saudi government is trying to accelerate the diversification of the economy, fleeing from the long and excessive dependence on the oil sector. Due to these initiatives, the doors are opened for the creation of Saudia subsidiaries; where all those interested entrepreneurs will have the opportunity to expand their business. There are many attractive industries to invest in Saudi Arabia, do you want to meet them? Keep reading.
However, it is currently facing two circumstances that are somewhat slowing down the process. Due, among other factors, to the drop in crude oil prices in 2020, the fiscal deficit stood at 12% of GDP last year, while public debt reached 32.5% of GDP, unusual figures in the country’s economy.
To achieve the gradual reduction of the public deficit, the main objective of its economic policy, the Government will have to cut subsidies; issue public debt; privatize state assets; raise taxes, fees, and tariffs; and rely on investment, both foreign (FDI) and domestic. In this way, a subsidiary in Saudi Arabia will become part of the private sector and not only part of the government
Several priority sectors identifies for both types of investment, including energy, transport and logistics, information and communication technologies, health, life sciences, education, and tourism. If you want to open a logistics company subsidiary in Saudi Arabia we are here for you.
2. Why do companies open subsidiaries in other countries?
Today, companies seek constant development; since it is not difficult to reach the top, that is why, despite having an open branch, they continue to search for expansion, as is the case with the Saudia subsidiaries. Next, we will talk about the reasons to open subsidiaries in other countries.
One of the main reasons is that they seek larger markets for their products, not only in the country of destination of the investment but also in neighboring countries or in countries that have trade agreements with the country of destination. For example, Embraer establishes factories and sales offices in the US and Portugal to take advantage of the trade preferences of the North American Free Trade Agreement (NAFTA), now known as T-MEC, and the Union’s single market. European; the same happens with the Saudia subsidiaries. This strategy makes its personnel more productive.
We call this type of investment an export platform because it allows companies to overcome barriers to trade such as tariffs or to physically get closer to their target market, thus reducing logistics and transportation costs.
2.2 Reasons to invest abroad
The second reason to invest abroad is to seek efficiency. Companies invest in various locations so that each product is manufactured where there is the best value for money. This type of investment is known as vertical investment. Volkswagen, despite having its open branch in Germany, produces and assembles cars in various parts of the world to reduce costs, but also to access the entire North American market thanks to NAFTA (T-MEC) from its plants in the Mexican states of Puebla. And Tlaxcala.
This investment, therefore, responds to a hybrid investment strategy that combines the export platform with the search for efficiency. In general, foreign investments create jobs; more than those that may eventually be lost due to the contraction or closure of local companies due to lack of competitiveness. Not only the magnitude but also the frequent quality of these jobs induce governments to want to attract foreign investment to their countries. This becomes an excellent opportunity for those entrepreneurs who have an open branch or those who want to experience investing for the first time in the market. Online business is actually the best market to invest.
3. How to set up a subsidiary in Saudi Arabia?
The first thing we need to know to open Saudia subsidiaries; is that the process is usually quite fast, and it usually takes two to four weeks for the issuance of the commercial registry and the deed of incorporation. Two weeks to issue the corresponding licenses, as long as you meet all the requirements and this is excellent for companies; since setting up a company abroad is not an easy task.
As well as, it is necessary to know that previously, there was a limit for the minimum investment amount, but currently there is no limit for the investment. In addition, the investment depends on the nature of the business activity. Thus, if your project is setting up a company, you should not worry so much about the budget. If you have a small company this is your opportunity.
4. What are the legal requirements to establish your company?
Entities in the Kingdom of Saudi Arabia can establish in different legal forms including for setting up a company:
- Joint values.
- Stock set closed.
- Limited liability (including a joint venture).
- Limited Liability Company.
- Sole Proprietor.
- A branch of a foreign company.
- A representative office.
Types of business licenses for subsidiaries
These are the most common types of licenses that your Saudia subsidiaries may need:
4.1 General Business License
Identifies where and what jurisdiction a business covers and ensures revenue is being collected by the proper tax authorities. It is the first thing in the process of setting up a company.
4.2 Professional or occupational license
Depending on the services you provide, you will require different things. To set up a company it is important to classify it and know what field it is aimed at.
4.3 Permission from the Department of Health
For anyone who produces sauces, baked goods, or other food products that may need an inspection.
4.4 Home Occupation Permit
It generally allows for signage, noise, or other environmental conditions that may affect the use and enjoyment of a neighbor’s adjacent property.
4.5 Sales tax license or registration
If you sell a product (online or offline), your business may have to collect sales tax from customers. This point is important to set up a company.
4.6 Withholding Tax Record
In some states, this is required if you are the only employee.
4.7 Fire Department Permits
If your business involves the use of flammable liquids or will be outdoors, you may need a permit from the Fire Department to ensure that any fire or harm to the public will be prevented.
4.8 Zoning permits
Zoning permits are required before building or using an existing building for your business.
In some cases, you may need to go to your city’s planning commission before doing any type of construction. Please note that this list does not end here, many other business licenses depend on the type of business you want to open. Everything depends on the PRO services needs of each city and usually you will require legal help.
5. Permits and licenses for a company by industries
To operate in Saudi Arabia, you need different licenses and permits to open a business depending on the line of business and the industry you chose. This includes online field and you need to follow the instructions if you want to position your brand as the best.
The list is long and the specifications vary by state. Here is a selection:
5.9.1 Electric
The electrical contracting industry is heavily regulated by state and local authorities throughout the country.
Each authority has unique business license laws and application requirements.
You can get electrical contractor, master electrician, journeyman electrician, and apprentice electrician licenses.
5.9.2 General contractor
Some states require a general contractor’s license to work legally, in others only registration with the State Board of Contractors or the local Department of Labor is needed.
The license may depend on the value of the work to be done, as well as the classification of your Saudia subsidiaries.
5.9.3 Specialty contractor
Refers to contractors who are licensed as experts in a particular field, for example, plumbing, carpentry, or painters.
As with general contractors, a state and local business license may be required.
5.9.4 Landscape contractor
Most states have a special classification for these contractors. Each country, city, and locality has its own laws and licenses to the practice of this activity.
5.9.5 Cosmetology and beauty salons
Improperly performed salon services can cause infection and injury to clients.
Hence, each state requires salon and cosmetology licenses to protect consumers by enforcing safe practices.
5.9.6 Cleaning business
Depending on the classification of your Saudia subsidiaries, you may need a service contractor license, a commercial cleaning license, or both.
5.9.7 Restaurants
They often require complex and specific business licenses, as they are subject to rigorous inspection and enforcement.
Some of the licenses that you need are food safety and handling license, construction license, alcohol license, and music licenses.
5.9.8 Trucks
All companies in the trucking industry require a large amount of paperwork to comply with all regulations and registrations.
Federal requirements may include a Department of Transportation number
Which is an operating authority and/or a registry of hazardous materials. And of course, let’s not forget the driver’s license.
Other trucking industry requirements vary based on the type of trip, load, and gross vehicle weight.
6. Benefits of Subsidiary in Saudi Arabia
In recent years, Foreign Direct Investment (FDI) in Saudi Arabia has maintained a downward trend due to different political aspects, as well as the drop in oil prices. However, the objective pursued by the country concerning diversifying its economy and the new projects it is launching helps to restore this dynamic.
Bearing this in mind, it is important to know what the benefits of Saudia subsidiaries are:
Since its entry into the World Trade Organization (WTO), more and more investors focus on this country. Thus, the creation of companies in Saudi Arabia has increased.
Currently, it is one of the states that enjoys the greatest economic estability due, in part, to a large number of oil reserves. For this reason, many investors find companies in Saudi Arabia attractive.
The Kingdom of Saudi Arabia has a population of more than 34 million inhabitants with one of the highest spending levels on the planet.
The finance and banking sector in this country is fully consolidated and regulated. For this reason, companies in Saudi Arabia are a source of investment with guaranteed results.
7. Are you interested in getting more information about the subsidiary in Saudi Arabia?
Working with our company will make opening your subsidiary way easier. Therefore, Company Formation Saudi is here for you to help you through every step of the process. As a result, our professional services include:
- Saudi company formation.
- Payroll solutions.
- Branch opening assistance.
- Accountant services.
- Immigration services.
- Visa solutions.
- Legal services.
- Virtual office.
You just have to let our highly trained staff assist you throughout your process. If you want to feel specialized and direct attention, you just have to call us at the following number +971 43 316 688. You can also send it to the following email contact@companyformationsaudi.com and we will be willing to resolve your concerns. Therefore, contacting us is the fastest way to start your process!