Doing business in Saudi Arabia

Saudi Arabia, the Middle East’s largest economy, offers a wide range of economic prospects as a result of its Vision 2030, an ambitious plan that aims to diversify the nation’s economy and open its doors wider to international investors. Understanding sector-specific criteria and potential constraints is critical to those considering doing business in the Kingdom. Here’s a quick rundown of the main sectors:


Foreign investors are generally allowed to invest in businesses providing services in Saudi Arabia, subject to certain restrictions for certain services. In recent years, the Ministry of Investment (‘MISA’), which is the government agency responsible for licensing foreign investment in the Kingdom, has allowed foreign investors to invest in a wider range of services sectors, and has canceled the minimum capital requirements (SAR500,000) for foreign investors who wish to obtain a services license. Services in which foreign investment is possible include construction, consultation, information technology, tourism, training, health, insurance and reinsurance, education, advertising and marketing, media, logistic services and transportation, exhibition organising, catering and food, financial services, oil and gas support services, and aviation and handling services.

Foreign investors can establish wholly-owned entities to engage in most service activities, except for those listed below.

Professional activities (consultation services)

To provide professional consultation services in Saudi Arabia, a foreign company must have at least one Saudi partner (an individual) who is licensed to practice the relevant profession and who owns at least 25% of the company’s capital. However, there is an exception to this rule. A foreign investor who meets the following two conditions can establish a wholly-owned entity to
provide engineering consultation services in Saudi Arabia:

  1. the foreign investor must be licensed in the same field in at least four countries; and
  2. the foreign investor must have at least 10 years of experience in engineering consultation.
Telecom services

Foreign investors can invest in the telecom sector in Saudi Arabia, but they must have a Saudi partner who owns at least 30% or 40% of the company. The 40% local ownership requirement applies to all telecom services, while the 30% local ownership requirement applies to value-added telecom services.

However, there is no clear definition of what constitutes value-added telecom services. This means that MISA has discretion to decide which services are considered value-added and which are not.

This restriction does not apply to information technology services such as IoT and cloud computing services.

Engineering, procurement and construction (EPC)

Similar to the restrictions imposed on professional activities, MISA requires foreign investors who establish EPC companies to have a local shareholder owning 25% of the company’s capital. This local shareholder does not need to have experience in the same field. This requirement does not apply to ordinary construction companies.

Real estate investment and financing

MISA requires that any real estate project that is owned partially or wholly by foreign investors must have a total value of at least SAR30m. This includes the value of the land and the construction costs. In addition, the projects must be located outside the borders of the cities of Mecca and Medina.

Real estate financing activities in Saudi Arabia require a minimum of 40% local ownership and a capital of SAR200m.

In addition to the above mentioned restrictions, other restrictions are also imposed on investment in insurance and reinsurance, digital brokerage, public and land transportation, and debt collection services.

Wholesale and retail trade

Wholesale and retail trading companies in Saudi Arabia are subject to capitalisation requirements and other restrictions that vary depending on the sector and the specific activity. In general, MISA has allowed foreign investors to invest in the wholesale and retail (trading) sector by choosing one of the two available options, which are summarised below:

Trading joint venture with a Saudi partner

Under this option, a foreign investor could partner with a Saudi partner to carry out trading activities, the local joint venture company (‘JVC’) would then be subject to the following requirements:

  1. Minimum Saudi ownership: The Saudi partner must own at least 25% of the share capital of local JVC and the foreign investor cannot own more than 75% of the share capital unless an exemption is obtained from MISA.
  2. Capital contribution: The foreign investor would be required to contribute no less than SAR20m into the capital of JVC and the Saudi partner would have to make a capital contribution pro rata its share interest.
Wholly foreign-owned trading entity

MISA has allowed foreign investors to establish a wholly foreign-owned trading entity. There are two options for a wholly foreign-owned trading entity:

  • Option (a): The local wholly foreign-owned trading entity would be required to invest SAR300m ($US80m) over a five year period, starting from its foreign investment license issuance date.
  • Option (b): The local wholly foreign-owned trading entity would be required to invest SAR200m (US$53.3m) over a five year period starting from its foreign investment license issuance date but also will be committing to adding value to the Kingdom in at least one of the following areas during these five years:
    1. 30% of its products sold in the Kingdom are manufactured locally; or
    2. 5% of its turnover is invested in research and development programmes; or
    3. a regional hub is set up in the Kingdom to provide logistics and after-sales services.


The Saudi government is encouraging investment in manufacturing through a number of incentives. From a foreign investment perspective, MISA does not impose any capitalisation or local ownership requirements on foreign investors wishing to establish manufacturing entities. In addition, the Zakat, Tax, and Customs Authority and the Ministry of Industry offer customs exemptions for manufacturing projects, including the ones that are partially or wholly owned by foreign investors. Furthermore, the Saudi Authority for Industrial Cities and Technology Zones (‘MODON’) would offer several incentives, including industrial lands with developed infrastructure and services, prefabricated factories, and ‘factory and loan’ product in cooperation with the Saudi Industrial Development Fund (‘SIDF’), a governmental entity. The SIDF also provides interest free loans to industrial projects whether owned by local or foreign investors as a further incentive to invest in industry.

Special economic zones

In April 2023, Saudi Arabia announced the establishment of four new special economic zones (‘SEZs’) in addition to the special integrated logistics zone (‘SILZ’), namely:

  • King Abdullah Economic City (KAEC) SEZ. This city will specialise in automobile supply chain and assembly, consumer goods, ICT (electronic light manufacturing), pharmaceutical, MedTech, and logistics.
  • Jazan SEZ. This city will specialise in food processing, metals conversion, and logistics.
  • Ras Al Khair SEZ. This city will specialise in shipbuilding and MRO along with Rig platforms and MRO.
  • Cloud Computing SEZ located in King Abdulaziz City for Science and Technology (KACST). This city will specialise in cloud computing.

The Saudi government has published draft regulations for public consultation on tax and customs, companies, and labour in all the SEZs. These regulations provide different incentives, including special tax treatment, exemption from customs duties, and exemption from applicable fees on expats and families.