Key Legal Requirements for UAE Companies Expanding into the Saudi Market

With the entry of Vision 2030 in Saudi Arabia, its economic landscape has positively changed, making it an attractive country for businesses eyeing to expand. 

UAE companies, in particular, have a strategic advantage due to the geographical proximity and cultural similarities between the two nations. 

However, entering the Saudi market requires going through structured legalities. There is a systematic process in registration and any error can be costly. 

So, understanding the legal requirements is crucial for a smooth expansion process.

Here is everything you need to know. 

Choosing the Right Business Structure

Basically UAE companies can enter the Saudi market in different ways, such as:

• Establishing a fully owned subsidiary
• Setting up a branch office
• Partnering with a local Saudi entity

There are several factors that affect the choice of structure–ownership rights, taxation, and compliance obligations. Before deciding the structure, you must ensure to carefully evaluate your long-term goals.

Documentation and Certification Requirements

Detailed documentation is mandatory for business setup in Saudi Arabia for foreign businesses. The documents they need to prepare include:

• Trade License and Commercial Registration Certificate
• Memorandum of Association
• Financial audit report from the previous fiscal year
• Power of Attorney

For companies operating within UAE free zones, additional certifications like the Certificate of Incorporation and Good Standing Certificate may be required. All documents must be attested by the UAE Ministry of Foreign Affairs (MOFA) and the Saudi Embassy before submission.

Capital and Investment Requirements

Investment thresholds vary based on the business type and ownership structure. The Ministry of Investment of Saudi Arabia (MISA) has defined specific capital requirements:

• Commercial license (with a 25% Saudi partner): SAR 7 million, with the foreign shareholder contributing SAR 20 million.
• Commercial license (100% foreign ownership): SAR 30 million, with a commitment to invest SAR 200 million within five years.
• Service/property investment: SAR 30 million minimum project value.
• Contracting businesses: SAR 500,000, along with revenue/asset value requirements.

Depending on the nature of the business, MISA may require additional approvals or financial commitments. Companies must plan their financial strategy accordingly to meet these obligations.

Government Registrations and Compliance

To operate legally, businesses must register with multiple government authorities. This includes:

1. Ministry of Investment (MISA): Approves foreign investments and business activities.
2. Ministry of Commerce: Registers the company name and Articles of Association.
3. Ministry of Human Resources and Social Development (HRSD): Ensures

compliance with labor laws and workforce requirements.

• General Organization for Social Insurance (GOSI): Manages employee benefits and social security contributions.
• Ministry of Interior: Oversees security clearance and residency permits.

These registrations are mandatory, and non-compliance can lead to penalties or operational restrictions.

Employment and Residency Permits

A designated General Manager (GM) is required to oversee operations, and they must obtain a Saudi work permit and residency visa (Iqama). Additionally:

• The GM must have health insurance as per Saudi law.
• Companies hiring expatriates need to comply with Saudization policies, ensuring a percentage of the workforce consists of Saudi nationals.

Opening a Corporate Bank Account

A corporate bank account is a must for managing financial transactions in Saudi Arabia.

Companies must provide the following to open a bank account: 

• Proof of registration
• tax identification
• An operational office address

Banks may impose specific compliance measures based on the business activity and ownership structure.

Overcoming Legal Challenges with Expert Assistance

If you’re unfamiliar with the local laws, the expansion journey to Saudi can be a bit…..overwhelming and confusing. 
So, ideally, it’s best to partner with experienced business consultants in Saudi Arabia. Why?

This can reduce the bumps in the setup process, ensure compliance, and get rid of delays.

These experts assist with: 

• Licensing
• Documentation
• Strategic planning

Wrapping Up

UAE companies looking to expand to Saudi Arabia have a promising future. But careful legal and regulatory compliance is a must to avoid hiccups. From selecting the right business structure to fulfilling documentation, capital, and registration requirements, every step must be handled with precision. 

The best bet? Team up with experienced consultants so that you can untangle the complexities, reduce risk and smoothen the market entry process. If you have a well-thought-out plan on the table, your UAE company can establish a spring foothold in Saudi Arabia. 

Last Updated on 7 hours by News Desk 2