Setting up a business in Saudi Arabia takes a lot of time, paperwork, and the proper submission of several legal documents. If you are a new entrepreneur, you are going to need a Trade License in Saudi Arabia in order to establish a company and operate it legally in the country. This process can be confusing and lengthy, this is why working with a professional agency is always advisable.
In this article, you will learn about the Trade License in Saudi Arabia, the process to obtain one, the different benefits/advantages of getting one, and how we can help you get to know more about this document
1. What is a Trade License?
A Trade License in Saudi Arabia is a document that provides legitimacy to a business and gives it the ability to perform certain activities in the country in which the Trade License was granted. You can only use this document for the activity it was originally granted for. It does not provide any special permission to carry out any other activity.
If you apply for credit or capital for your business, you may need to present a Trade License in Saudi Arabia. You will also need it if you want to open a business checking account. More so, it will be of value when you start hiring employees. In the same vein, you can get the financial advice you need with the best Saudi experts.
The Ministry of Investment of Saudi Arabia (MISA) is in charge of issuing the Saudi Arabia Trade License. The main goal of this entity is to grant businesses all over the country the authority to conduct certain activities.
1.1 Why do you need a Trade License in Saudi Arabia?
One of the reasons why it is so important for your company to get this license is to prove that the activities you carry do not present any health hazard. It also shows that your business is not going to perform any actions that would be considered a nuisance. The fee you will need to pay for a Trade License in Saudi Arabia is determined by MISA.
1.2 When should you get a Trade License?
If you are planning to start a company in Saudi Arabia, you must get a Trade License before you begin your commercial operations. This will validate your business to do certain activities. This document acts as a type of permission slip that allows you to carry out your operational processes.
1.3 Important things to consider before applying for a Trade License in Saudi Arabia
- You must renew your Trade License annually, and it must be renewed within 30 days of its expiration date.
- The applicant must be at least 18 years old.
- You will need to submit the application and legal documents, such as your business plan, before you start operating in the country.
- The applicant cannot have a criminal record.
- The entrepreneur must be able to execute legal work, such as reporting income and expenses.
2. How to Get a Trade License in Saudi Arabia?
If you want to obtain a Trade License in Saudi Arabia, you will have to think about the options available to you. Some basics steps to obtain this license are the following:
2.1 Licensing and registering
When it comes to this step, Limited Liability Companies are the easiest to apply for. To register this type of company, the entrepreneurs must first go to MISA to get the foreign capital investment license, before proceeding with the registration of their company with the Ministry of Commerce and Industry (MOCI). Obtaining a Saudi Arabia Trade License requires five working days to complete, you must pay a fee of SAR 2,000, and you can extend it up to 15 years.
2.2 Reserving the name
The Ministry of Commerce and Industry (MOCI) is the entity in charge of approving the name of your company. Generally, this process takes one working day if you do it online.
2.3 Opening a bank account
Every company in Saudi Arabia needs a bank account in order to operate efficiently. This process, generally, takes one working day and at no charge. However, if you wish to hire the services of the best accountants, you can rely on Company Formation Saudi.
3. What kind of businesses can you start with a Trade License in Saudi Arabia?
Before setting up a company, It is always advisable to count on the experience of a business consultant in Saudi Arabia in order to find the best deals and make the best decisions.
According to experts, some of the most common types of businesses for which you can receive a Trade License in Saudi Arabia are the following:
3.1 Limited Liability Company (LLC)
Foreign entrepreneurs, generally, prefer this entity to establish a company in Saudi Arabia. The registration process of this business requires a minimum of one shareholder and no more than fifty shareholders. If the shareholder count exceeds fifty, the LLC must be converted into a Joint-Stock Company within a year.
Shareholders may be corporate entities, natural persons, or a combination to form an LLC. This entity is favored by foreign investors looking to enter joint ventures with Saudi companies or individual Saudi Nationals.
A Limited Liability Company can engage in activities under the approved commercial registration. This entity can participate in private or public sector contracts, obtain a corporate bank account, sponsor foreign employees for residency, invoice customers and pay suppliers, etc.
For an LLC, it is not necessary to have a board of directors. However, many companies decide to establish a board and integrate this into their Memorandum of Articles and Association. There is no limitation on the percentage of foreign ownership for an LLC. The personal liability of each partner is limited to the individual shareholders’ contribution to the share capital.
Since there are no minimum capital requirements, the paid-up capital amount will depend on the business activity and ownership structure. The Ministry of Investment of Saudi Arabia (MISA) will define the amount of capital upon application.
3.2 Branch of a foreign company
A foreign company can operate and establish a foreign Saudi branch office. Foreign companies, generally, prefer this entity type to enter the Saudi market. The activities of this branch must match the parent company.
This entity can only engage in commercial activities within the license’s scope, sponsor foreign employees for residency, participate in private or public sector contracts, obtain a corporate bank account, invoice customers, pay suppliers, etc.
This type of company must deposit an amount equivalent to the capital required for a subsidiary. Every entrepreneur must complete the paid-up capital requirement and deposit this to a local bank. The parent company is responsible for the business activities the Saudi branch participates in.
To form a branch office, you must own a company in another country. The Saudi branch belongs completely to the foreign investor (parent company). The first step is contacting the Saudi Arabia General Investment Authority (SAGIA). Then, the Ministry of Commerce and Industry issues the commercial registration for the branch.
Since there are no reserve requirements or articles of association that need approval, the branch setup may be quicker than an LLC or a JSC.
It is always advisable to seek corporate and tax structuring advice from our consultants to ensure that forming a Saudi branch office is the correct decision for your company group structure. An auditor must be present once the branch setup is ready.
3.3 Joint-Stock Company (JSC)
A Saudi Joint-Stock is the equivalent of a publicly listed company. This company set up structure is popular among multinational companies or companies that are already publicly listed on other stock exchange markets.
The business law in Saudi Arabia states that if the number of shareholders exceeds more than fifty, a Limited Liability Company must change to a Joint-Stock Company within a year. Other regulations imposed on JSCs increase compliance costs considerably compared with LLCs.
A Joint-Stock company can engage in activities approved under the commercial registration. For example, obtain a corporate bank account, disburse dividends, sponsor foreign employees for residency, pay suppliers, and invoice customers.
For this type of company, there is a minimum of two shareholders, however, there is no maximum number of shareholders. This being said, at least three directors (can be non-Saudi residents) must be appointed for the company incorporation. Shareholders can be corporate entities, natural persons, or a combination to form a Saudi Joint-Stock Company. The shareholders must register with the Ministry of Commerce (MOC) and update as required.
The minimum share capital to form this entity in Saudi Arabia is SAR 500,000. The capital of this entity is divided into negotiable shares of equal value. And are, generally, provided by share certificates. A JSC is liable for debts and liabilities arising from its activities. Another key point of this entity is that the Ministry of Commerce and Industry may approve for the capital to be paid in stages.
The first step to forming this entity is to contact MISA. Once all the legal documents are ready, the commercial registration certificate is issued.
3.4 Technical and Scientific Services Offices (TSO)
The main goal of technical and scientific services offices is to provide technical support to the parent company’s Saudi Arabian agent or distributor. This type of company cannot carry out any sales activities and there is no minimum capital requirement.
3.5 The Establishment
The Establishment structure for a Saudi company is similar to a sole proprietorship in other regions. This entity can only have a single owner and is only eligible for Saudi or GCC Nationals. The company owner of an establishment is responsible for any debts the business may accumulate.
Just like the entities shown above, the establishment structure engages in the business activities approved under the approved commercial registration.
4. Advantages of obtaining a Trade License in Saudi Arabia
4.1 Large number of products
Almost every product allowed in the country is registered under a Trade License in Saudi Arabia (apart from a few sensitive materials or specific products). Hence, trading numerous products under a single license will provide continuous benefits for years.
4.2 Simple processing
Getting a Trade License in Saudi Arabia is an easy process when you compare it with other types of licenses. You can obtain your license in a couple of days from the Ministry of Commerce and Industry after submitting the necessary documents.
4.3 Local and International Trade
Entrepreneurs have the chance to manufacture or import all the goods mentioned in the Trade License in Saudi Arabia. They can either distribute it in the local market or export manufactured goods or re-export (imported goods) in the country of their choice.
5. How can a business consultant help you with the application process for your Trade License in Saudi Arabia?
Working with a specialized business consultant will make the application process for your Trade License in Saudi Arabia much easier. Business consultancy services add value to the companies that create an environment oriented to the development of strategies and project management.
These professionals can offer innovative solutions and ideas to maintain your company in the long term. This is why working with a business consultancy agency is always advisable.
6. Why is Company Formation Saudi the best consultancy agency for your company?
Establishing a business and getting a Trade License in Saudi Arabia can be a complicated process for investors due to all the paperwork and the different legal procedures that must be carried out. Working with Company Formation Saudi will help you secure a quick and efficient conclusion of every process and the proper compliance with the country’s laws.
In the same vein, you should check out our legal services and how they can help you protect your business. Things like insurance, and legal compliance will no longer be a problem if you have the right partners.
If you are interested in requesting our services, you can contact us, email us at firstname.lastname@example.org. Our team members will find you a solution for all your concerns.