Legal and regulatory requirements to start a

business in KSA (Including tax, Insurance, Staffing,

Business operations)
The law of the KSA is Shari'ah, drawn from the Holy
Qur'an (the divine revelation to the Prophet Mohammed)
and the Sunnah (a record of the sayings and actions of
the Prophet Mohammed). Unlike other jurisdictions in the
Muslim world where Shari'ah law is applied only in
specific contexts (e.g., family law and inheritance), in the
KSA, Shari'ah law is the law of the land in all cases, and
other laws are enforceable only to the extent that doing
so does not violate the precepts of Shari'ah.
1-Zakat and Income Tax Law
Saudi Arabia operates a dual taxation system. "zakat," a
wealth tax based on 2.5% of the total capital held by a
person. Foreign entities, which include almost every
company owned by non-GCC persons, are subject to the
requirements of the "income tax" law.
Non-KSA entities pay income tax on KSA income derived
from KSA sources at a flat rate of 20%, as adjusted.
KSA registered entities are required to also withhold
payments to foreign entities for purposes of paying a
withholding tax. Amounts of such withholdings include:
management fees: 20% withholding tax
royalties: 15% withholding tax
rent/technical/consulting fees: 5% withholding tax
 2-Employment Law
Relations between employers and employees are
governed primarily by the Labor Law which covers all
aspects of employment relations, including employment
contracts, wages and benefits, leaves, working hours and
the termination of employment. There is also extensive
regulation relating to the women in the workplace.
Non-Saudi nationals may work in Saudi Arabia provided
they have prior approval from the Ministry of Labor.
Applicants must have an entry visa issued by the Saudi
Embassy from the country of origin. Employers are
required to secure work permits and residence permits
("Iqama") for foreign employees brought into the country
within 90 days of the employee's arrival. Similar to other
Gulf countries, Saudi Arabia has a sponsorship system,
which means that expatriate workers can enter, work and
leave the host country only with the permission or
assistance of their sponsor. However, in Saudi Arabia, the
sponsorship system extends to a number of other
services and routine activities, with requirements often
arising for presentation of a letter of support from a
sponsor before an expatriate will be permitted to lease a
residence, open a bank account, rent a vehicle, or
perform many other types of common transactions.
The KSA government has long implemented various
"Saudization" policies intended to encourage employers
to hire Saudi nationals in preference to foreign
expatriates. A system called "Nitaqat" also exists, by
which employers are penalised if they fail to achieve the
Saudization targets that apply to them.
3-Insurance
Under the new regime only Saudi-registered companies
which are incorporated by Royal Decree as public joint
stock companies, with a minimum paid-up capital of
US$26.66 million for primary insurers and US$53.33
million for reinsurers, may provide insurance cover in the
Kingdom.
The regulator is the Saudi Arabian Monetary Agency
(SAMA), which has been given wide-ranging powers,
including the licensing of insurance companies and
insurance professionals, and policing and control of the
Saudi insurance market. Insurers must be licensed by
SAMA to write specific classes of business, which are
broadly grouped as general insurance (including accident,
liability, motor, property, marine, aviation, energy and
engineering), health insurance, and saving and life
insurance, or for two or more of these.
4-Business operations
Small business owners make a wide variety of legal and
financial decisions in their day-to-day operations,
including the management of small business insurance
costs and identifying their target markets. The following
resources will help you get up to speed with marketing,
advertising, extending credit, e-commerce, the use of
technology in day-to-day operations, business insurance,
negotiating leases, managing logistics (such as shipping
and inventory), and other topics related to general
business operations.
Unless your business is run out of your home, you
probably need to purchase or lease a space. The type of
space you need will depend on a number of factors,
including the type of business (office, factory, retail?),
available cash flow for rent, and growth expectations. If
you operate a retail business, then you'll want to locate
near your customers. If you're not sure what your needs
will be like in a few years, then you probably don't want
to purchase a property.
The types of property that can be located in a given area
is governed by zoning laws. The five main types of
building zones are:
Residential (homes)
Commercial (retail and/or offices)
Industrial (manufacturing)
Agricultural
Recreational
Having a Website for your company is no longer seen as
an advantage, but rather a necessity for doing business,
but if you plan on getting into e-commerce, you will need
to pay attention to all relevant laws and make sure your
customers' data is secure. Also, make sure your preferred
URL (XYZ.com) is not already taken, since the Website will
be important to your brand and you'll also want to avoid
any copyright infringements.