Saudi Arabia is becoming one of the most attractive markets for startups in MENA. But the legal landscape has unique requirements. Here's what every founder needs to know.
Why Saudi Arabia?
The opportunity:
- Largest economy in MENA (35M population, high purchasing power)
- Vision 2030 driving digital transformation
- Government support for startups and innovation
- $5B+ in startup funding in 2025
- Growing local VC ecosystem
The challenges:
- More complex setup than UAE
- Saudization requirements
- Cultural and language considerations
- Bureaucracy (improving but still present)
Company Formation Options
Option 1: Limited Liability Company (LLC)
Most common structure for startups.
Key features:
- Minimum 2 shareholders (can be individuals or companies)
- Maximum 50 shareholders
- Minimum capital: SAR 500,000 (~$133,000) - but can be paid in stages
- Limited liability for shareholders
Ownership:
- 100% foreign ownership now allowed for most sectors
- No local partner required (major change from old rules)
- Some restricted sectors still require Saudi partner
Best for: Most startups, B2B and B2C businesses
Option 2: Single-Person Company (SPC)
Introduced recently for solo founders.
Key features:
- One owner only
- Minimum capital: SAR 250,000 (~$67,000)
- Simpler governance than LLC
- Owner has limited liability
Best for: Solo founders, consultants, small service businesses
Option 3: Branch of Foreign Company
If you already have a company elsewhere.
Key features:
- Not a separate legal entity
- Parent company liable
- Requires commercial registration
- Must have Saudi service agent
Best for: Established companies expanding to Saudi
Option 4: Freelance/Individual License
For solo consultants and service providers.
Key features:
- Simplest setup
- Lowest cost
- Can be done online through MISA portal
- No minimum capital
- Personal liability
Limitations:
- Cannot hire employees
- Cannot sponsor visas
- Limited business activities
- Not suitable for investors/funding
Best for: Solo consultants testing the market
The Setup Process: Step by Step
Step 1: Get MISA Approval
MISA = Ministry of Investment of Saudi Arabia
This is your starting point for foreign investors.
Process:
- Submit application through MISA portal (invest.sa)
- Provide business plan and supporting documents
- Wait for approval (1-4 weeks typically)
Required documents:
- Passport copies of all shareholders/directors
- Business plan
- Financial statements (if existing company)
- Criminal background check (for some activities)
Investment license fee: SAR 4,000 (~$1,000)
Note: Saudi nationals can skip MISA and go directly to Ministry of Commerce.
Step 2: Reserve Company Name
Through Ministry of Commerce portal.
Naming requirements:
- Must be in Arabic (English translation can be registered separately)
- Cannot conflict with existing names
- Cannot be religiously sensitive
- Must indicate legal form (e.g., "شركة ... محدودة" for LLC)
Fee: SAR 200 (~$55)
Step 3: Draft Memorandum of Association (MOA)
MOA must include:
- Company name and objectives
- Capital structure and shareholding
- Board structure and powers
- Profit distribution
- Dispute resolution
Must be:
- In Arabic
- Notarized
- Following Saudi Companies Law template
Cost: Legal fees SAR 5,000-20,000 ($1,300-5,300) depending on complexity
Step 4: Register with Ministry of Commerce (MOC)
Submit commercial registration application through MOC portal.
Required documents:
- MISA approval (for foreign investors)
- MOA
- Name reservation confirmation
- Proof of capital deposit
- Lease agreement for registered office
Fee: SAR 1,200 (~$320)
Timeline: 1-2 weeks
Step 5: Get Municipal License
Required if you have physical location.
From local municipality (Baladia).
Requirements:
- Lease agreement
- Civil defense approval (for some activities)
- Health permit (for food/health related)
Fee: Varies by city and activity, typically SAR 500-5,000
Step 6: Register for Zakat/Tax
With ZATCA (Zakat, Tax and Customs Authority).
Tax obligations:
- Zakat: 2.5% of capital (for Saudi/GCC shareholders)
- Corporate Tax: 20% of profits (for non-Saudi/GCC shareholders)
- VAT: 15% (must register if revenue >SAR 375,000 annually)
Timeline: Register within 60 days of commercial registration
Step 7: Register with GOSI
GOSI = General Organization for Social Insurance
Mandatory for all businesses with employees.
Coverage:
- Work injury insurance
- Unemployment insurance (SANED)
- Pension (for Saudi employees)
Contributions:
- Employer pays 12-21.5% of Saudi employee salaries
- 2% for expat employees (work injury only)
Step 8: Register with Ministry of Labor (Qiwa)
Qiwa platform handles:
- Employment contracts
- Visa applications
- Work permits
- Saudization compliance tracking
All employment contracts must be registered through Qiwa.
Step 9: Open Corporate Bank Account
Popular banks for startups:
- Al Rajhi Bank: Largest Islamic bank, startup-friendly
- Riyad Bank: Good digital banking
- Saudi National Bank (SNB): Merger of SABB and Alawwal
- Arab National Bank: Flexible for SMEs
Required documents:
- Commercial registration
- MOA
- MISA license
- Passport copies
- Municipal license
- Proof of address
- Board resolution
Initial deposit: Typically SAR 50,000-100,000 minimum
Timeline: 2-6 weeks (can be slow)
Pro tip: Start early, have all documents ready, follow up persistently.
Visa and Work Permits
Work visa process:
Step 1: Job offer and contract
Employment contract registered in Qiwa
Step 2: Visa application
Through Qiwa/MOL portal
Requirements:
- Valid passport (6+ months)
- Medical insurance
- Saudization quota compliance (see below)
Step 3: Visa issuance
Employee receives visa authorization number
Step 4: Entry to Saudi
Employee enters Saudi with visa authorization
Step 5: Medical examination
Required within 30 days of arrival
Step 6: Iqama issuance
Resident permit (Iqama) issued after medical clearance
Cost per visa: SAR 2,000-4,000 all-in
Timeline: 2-4 weeks for visa issuance, 2-4 weeks for Iqama after arrival
Saudization (Nitaqat)
What it is:
Mandatory Saudi national employment quotas.
How it works:
Nitaqat categories:
- Platinum (highest Saudi %, most benefits)
- Green (acceptable, can get visas)
- Yellow (warning, limited visas)
- Red (non-compliant, penalties)
Requirements vary by:
- Company size
- Industry sector
- Current Saudi employment rate
Example:
Tech company with 20 employees might need 2-4 Saudi nationals (10-20%).
Strategies for compliance:
1. Hire Saudi talent
Invest in recruiting from:
- Universities
- TAQAT job portal
- Local talent agencies
- Coding bootcamps (for tech roles)
2. Participate in Takamul program
Government program subsidizing Saudi salaries (up to 50% for first 2 years)
3. Hire part-time Saudis
Flexible arrangements count toward quotas
4. Outsource to compliant providers
Some admin/support functions can be outsourced
Penalties for non-compliance:
- Visa restrictions
- Fines
- Service suspensions
- Cannot renew licenses
Startup exemptions:
Some accelerators and programs offer temporary Saudization relief. Check with Monsha'at (SME Authority).
Ongoing Compliance
Annual requirements:
1. Commercial registration renewal
Every year, SAR 1,200
2. Municipal license renewal
Every year
3. Zakat/tax filing
Annual tax returns to ZATCA
4. GOSI contributions
Monthly payments
5. Wage Protection System (WPS)
All salaries must be paid through approved bank channels
6. Financial statements
Audited statements if revenue >SAR 40M
7. Visa renewals
Iqamas renewed annually
Quarterly:
- VAT returns (if registered)
Monthly:
- GOSI payments
- WPS salary payments
Intellectual Property
Register your IP through SAIP (Saudi Authority for Intellectual Property):
Trademarks:
- File through SAIP portal
- SAR 1,000 per class
- 6-12 months processing
Patents:
- SAR 2,000 filing fee
- 2-3 years processing
Copyright:
- Automatic protection
- Registration optional but recommended
Pro tip: Register trademark before launching to avoid squatters.
Data Protection and Privacy
Saudi Personal Data Protection Law (PDPL):
Effective since 2023, similar to GDPR.
Key requirements:
- User consent for data collection
- Data minimization
- Security measures
- Breach notification
- Data localization for sensitive data
Penalties: Up to SAR 5M for violations
Compliance steps:
- Privacy policy on website
- Cookie consent
- Data processing agreements with vendors
- Security measures (encryption, access controls)
Funding and Investment
Regulatory framework:
Foreign investment into Saudi startups is now straightforward with 100% foreign ownership allowed.
Investment structures:
- Direct equity investment in LLC/SPC
- SAFE notes (increasingly common)
- Convertible notes
No capital gains tax on share sales (currently)
Saudi VC ecosystem:
- STV
- Raed Ventures
- Wa'ed Ventures
- Vision Ventures
- Plus regional VCs (Mubadala, BECO, etc.)
Government Support Programs
Monsha'at:
SME Authority offering:
- Grants and incentives
- Mentorship programs
- Saudization support
- Export support
SAGIA/MISA incentives:
- License fee waivers
- Visa allocation support
- Fast-track services
Accelerators:
- Badir (government)
- TAQNIA
- 500 Global Riyadh
- Wa'ed accelerator
Costs Summary
Setup costs (LLC, 2 founders):
- MISA license: SAR 4,000
- Commercial registration: SAR 1,200
- Legal/MOA: SAR 10,000
- Municipal license: SAR 2,000
- Office deposit: SAR 20,000
- Visas (2): SAR 6,000
- Bank account: SAR 500
- Misc: SAR 5,000
- Total: SAR 48,700 (~$13,000)
Annual recurring:
- License renewals: SAR 3,000
- Office rent: SAR 60,000
- Visa renewals: SAR 4,000
- Accounting: SAR 15,000
- Legal: SAR 10,000
- GOSI/insurance: SAR 20,000
- Total: SAR 112,000 (~$30,000) + salaries
Common Mistakes
❌ Underestimating Saudization impact
Plan Saudi hiring from day 1
❌ Poor Arabic documentation
All legal docs must be proper Arabic, not translations
❌ Ignoring labor law
Strict requirements, high penalties
❌ Late VAT registration
Register before hitting threshold
❌ Weak legal counsel
Hire Saudi-qualified lawyer, not just regional
Should You Use a Local Partner/Service Provider?
Options:
1. Full-service setup companies:
- Handle entire process
- SAR 20,000-40,000
- Good for first-timers
2. Law firms:
- Legal heavy-lifting
- SAR 30,000-100,000
- Good if complex structure
3. DIY with PRO:
- You manage, PRO executes
- SAR 10,000-20,000
- Good if cost-sensitive
Recommendation: Use service provider for first setup, especially if you're not based in Saudi.
The Bottom Line
Saudi setup is more complex than UAE but getting better:
- Allow 2-3 months for full setup
- Budget $15,000-25,000 for setup
- Saudization is real - plan for it
- Government is startup-friendly and improving processes
Best approach:
- Validate market fit first (can operate from outside initially)
- Engage local legal counsel early
- Use government programs and accelerators
- Build strong Saudi team from start
The Saudi market opportunity is worth the complexity.
