GUIDE ON SETTING UP A MANUFACTURING BUSINESS IN SAUDI ARABIA
Published on June 10th, 2022.
Saudi Arabia has made massive strides over the years to open its market to international investors. The Kingdom of Saudi Arabia is much keen to diversify its economy and move away from oil dependency. Given the growing needs within the region, Saudi wants to play an integral role in its development and become the centre of production and manufacturing in the GCC region.
Saudi Arabia’s Government has launched incentives and programs to promote and attract more investors to the manufacturing industry throughout the country. Currently, there are 10,000 plus factories in Saudi Arabia spanning various sectors ranging from food and pharmaceuticals to the production of metals, machinery, and equipment manufacturing.
WHAT ARE THE REQUIREMENTS FOR REGISTERING A MANUFACTURING LICENSE IN SAUDI ARABIA?
A manufacturing licensed company in Saudi Arabia can be 100% owned by a foreign shareholder (non-Saudi national). The Ministry of Investment in Saudi Arabia (MISA) issues a manufacturing license to foreign businesses and shareholders. It is important a business fully understands the relevant documents that MISA will request for review and to approve the company application. The options for forming an industrial license are a subsidiary of a foreign company or as a branch. Either way, the parent company must demonstrate financial good standing through its audited financial accounts. Businesses require a nominal share capital with respect to the size of their operation in the country and must sell at least 30 percent of the production within Saudi Arabia. With a manufacturing license, a company can sell its produced goods to businesses or distributors within Saudi Arabia.
WHAT APPROVALS ARE REQUIRED FOR A MANUFACTURING COMPANY IN SAUDI ARABIA?
All manufacturing business licenses in Saudi Arabia must be compliant with the environmental standards set by the General Presidency of Meteorology and Environmental Protection. Each company needs to ensure all environmental hazards are minimised, removed, or disposed properly. For example, chemical manufacturing companies produce harmful wastes which are hazardous and corrosive and require to be carefully collected and transported to a government approved waste management facility. This government approved waste management body ensures that the chemical industry has complied with the resource allocation and abides by the environmental hazard mitigation strategies.
The Ministry of Industry and Mineral Resources grants licenses for all manufacturing licenses in Saudi Arabia. It is the regulatory body for all industrial and mining-related licenses in the Kingdom. The ministry operates and grants licenses across the 13 administrative regions within the country. As reported by the ministry, over 900 new industrial licenses were issued during the FY 2021 with capital exceeding US$ 80 Billion, and over 270 new licenses during the first quarter of 2022 with a capital of over US$ 8.8 Billion. The ministry is also engaged in rolling out incentives to attract industrial investment and provide platforms for businesses to secure funding as well.
WHAT IS SAUDISATION & WILL THIS APPLY TO A SAUDI MANUFACTURING COMPANY?
Saudisation is the Saudi nationalisation scheme to increase the employment of Saudi nationals in the private sector. The goal is to havemore Saudis working and reduce the reliance on foreign workers.
SAUDISATION RATES WILL DEPEND ON:
Location of business
All manufacturing license companies need to comply with Saudisation rules. Note, Saudisation rates can vary between the size of the industrial setup, the complexity of the business, and the sector of the business. Businesses are required to evaluate and conduct thorough research on the land requirements, the overall costs of setup, the labour, staff requirements along with their accommodation, the costs of utilities, the access to raw materials, and the distribution logistics along with ongoing running costs to ensure a successful operation of a business in the country. Saudi government rolls out incentives and financing facilities to support and accelerate business setup and ongoing.
WHAT IS THE PROCESS TO SETUP A SAUDI MANUFACTURING COMPANY?
All foreign non-GCC national owned businesses require their company documents to be legalised and attested by the Saudi Embassy. Once the MISA license is issued, the company must register with the Ministry of Commerce. Afterward, the company secures a land contract for the manufacturing facility along with the building permits from Municipality. Once the final industrial license is issued by the Ministry of Industry and Mineral Resources, the company must complete all the relevant environmental permits. Post Commercial Registration (CR) external government departments also require registrations e.g., labour file opening and tax registration, etc. Thereafter, the Saudi manufacturing company will be fully operational to hire staff, open a company bank account and invoice its customers.
Interested in setting up a manufacturing plant in Saudi Arabia? For further information regarding tax and company setup services in Saudi Arabia email firstname.lastname@example.org or call our KSA Office: +966 54 995 2676, Dubai Office: +971 4 878 6240 for a free initial consultation.