Doing Business in Saudi Arabia

Do you want to expand your business into Saudi Arabia or hire employees there? Here are some key things you need to know about a Saudi Arabia expansion.

Saudi Arabia Economy Overview

Currency

Saudi Riyal (SAR)

Working hours

36 – 48 hours/week

Public/bank holidays

16 public holidays

Capital

Riyadh

Languages

Arabic

Population

36.9 M

Minimum monthly salary

SAR 4,000

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Penalties for misclassification may include back-payment of minimum wage, overtime, paid vacation, pension and employment insurance contributions. Interest of 10% or 20% may be applied, as well as punitive damages in seriouss cases.

Fun fact

Saudi Arabia is home to the largest continuous sand desert in the world, the Rub’ al Khali, or “Empty Quarter.” It covers about 650,000 square kilometers and includes parts of Saudi Arabia, Oman, the UAE, and Yemen.

With a population of over 37 million people, Saudi Arabia is recognized as an economic powerhouse in the Middle East. It possesses the second-largest oil reserves in the world and has a GDP of approximately $833.54 billion as of 2024.

The country’s economy is primarily driven by the oil and gas industry, which plays a critical role in the global energy market. Beyond petroleum, Saudi Arabia has been actively diversifying its economy through sectors such as mining, which includes substantial deposits of ferrous and non-ferrous minerals, real estate, agriculture, and automotive. This diversification is a key part of the Vision 2030 initiative, aimed at reducing the kingdom’s dependency on oil and fostering the development of other sectors to provide a wider variety of employment opportunities to its growing population

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Overview of Saudi Arabia's Economy

Saudi Arabia’s economy has traditionally been dominated by oil exports, but recent years have seen a significant transformation under its Vision 2030 initiative. This ambitious project aims to diversify the country’s economic sources, reducing dependency on oil and fostering sustainable growth through investments in non-oil sectors. As the largest economy in the Middle East, Saudi Arabia’s strategy includes enhancing public service sectors such as health, education, infrastructure, recreation, and tourism.

Substantial investments have been made in mega-projects like NEOM, a $500 billion futuristic city that integrates smart technologies and serves as a hub for tourism and innovation.

Project	Goals
Red Sea Project	– Boost luxury tourism – Cater to global travelers – Diversify the economy – Create about 70,000 jobs – Contribute $5.3 billion annually to the Saudi economy by 2030

The mining sector has been identified as the third pillar of Saudi Arabia’s economy. Significant investments are being made to transform and develop this sector, with plans to contribute 240 billion riyals to the GDP by 2030. The Kingdom’s untapped mineral resources, estimated at 5 trillion riyals, present a substantial opportunity for growth.

Saudi Arabia’s financial sector is also undergoing reforms. The Saudi Arabian Monetary Authority (SAMA) is enhancing banking regulations to support private sector growth, and the Saudi stock exchange, Tadawul, has been opened to foreign investors, integrating Saudi Arabia more deeply into global finance.

Taxes

Employer tax: 12%

Social Security

12%

Employee tax: 10%

Social Security

10%

Income tax

There is no income tax scheme for residents of Saudi Arabia. Non-residents conducting business in-country are subject to a flat rate of 20 percent,

Business Regulation in Saudi Arabia

Understanding the business regulations in Saudi Arabia is essential for businesses who are looking to operate within its borders. The kingdom has put new reforms in place to create a more business-friendly environment, attract more foreign investment, and reduce unnecessary bureaucratic hurdles.

Business Registration and Licensing

To start a business in Saudi Arabia, foreign entities must navigate a streamlined registration process to encourage foreign direct investment. This includes obtaining a license from the Ministry of Investment of Saudi Arabia (MISA). Additionally, companies must register with the Saudi Arabian General Investment Authority (SAGIA) to acquire investor licenses. These steps are essential to ensure compliance with local regulations and to facilitate smooth business operations in the Kingdom.

Taxation

Saudi Arabia offers an attractive tax environment for foreign investors. There is no personal income tax, and corporate tax is typically set at 20% for foreign companies. Additionally, the introduction of Value Added Tax (VAT) at a standard rate of 15% in 2020 reflects a shift towards diversifying the economy away from its reliance on oil revenues. This diversified approach aims to stabilize the economy and create a more sustainable financial structure.

Labor Laws

The Saudi labor market is governed by the Saudi Labor Law, which details the rights and obligations of employees and employers. This includes all aspects related to employment contracts, wages, working hours, and termination procedures. In addition to these regulations, Saudi Arabia has implemented significant reforms to enhance the appeal of the private sector to Saudi nationals. A key component of these reforms is the Saudization initiative (Nitaqat), which mandates the employment of Saudi citizens in certain sectors to increase local employment and reduce reliance on expatriate labor.

Intellectual Property Protection

Saudi Arabia has strengthened its intellectual property laws to align with international standards, offering enhanced protection for patents, trademarks, and copyrights. This move is part of a broader effort to attract technology and innovative businesses to the country. These enhanced protections aim to foster an environment conducive to innovation and investment, ensuring that businesses can confidently develop and market new products and technologies without fear of infringement.

Benefits of Doing Business in Saudi Arabia

There are several benefits to doing business in Saudi Arabia, especially for businesses looking to expand in the Middle East. Here are some key benefits:

Strategic Geographic Location

Saudi Arabia’s strategic position in the heart of the Middle East and its proximity to other key markets in Europe, Asia, and Africa make it a great location for regional operations. This central location makes it a great deal easier for logistics and distribution across the continents.

Economic Stability

Saudi Arabia has considerable economic stability, which is supported by its vast oil reserves and proactive economic policies that are aimed at diversification and sustainability. This stability provides a secure environment for investment and business operations.

Government Incentives

The Saudi government provides numerous different incentives to attract foreign businesses, including tax incentives, subsidies, and comprehensive support through business centers like the Saudi Arabian General Investment Authority (SAGIA). These incentives can be very lucrative for strategic and high-tech industries.

Growing Market

With a large and increasingly affluent population, Saudi Arabia provides a growing domestic market. The government’s focus on economic diversification and modernization under Vision 2030 is opening new sectors for business, from tourism to technology and beyond, making it ripe with development opportunities.

Business Expansion Options in Saudi Arabia

Expanding into Saudi Arabia offers various strategic avenues for international businesses that want to tap into its market.

Saudi Arabia Employer of Record (EOR)

Similar to PEOs, an EOR can employ staff on behalf of the company and handle all legal and regulatory responsibilities. This is great for businesses that need to quickly establish a workforce in Saudi Arabia without the complexities of setting up their own entity.

Learn more about EOR in Saudi Arabia

Recruitment Agencies

Recruitment agencies in Saudi Arabia help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Saudi labor laws.

For businesses looking to grow in Saudi Arabia, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

Learn more about Recruitment Agencies in Saudi Arabia

Saudi Arabia Professional Employer Organization (PEO)

Partnering with a PEO allows companies to employ local staff without having to establish a physical presence. A PEO manages all employee-related functions, from payroll to compliance, making it a hassle-free option for companies testing the Saudi market.

Subsidiary Incorporation

Establishing a wholly-owned subsidiary in Saudi Arabia is a common approach for foreign companies that are seeking full control over their local operations. This method allows businesses to directly engage in all activities and benefit from local incentives but requires significant investment and strict adherence to comprehensive regulatory requirements.

Branch Registration

Foreign companies can also register a branch in Saudi Arabia, which enables them to operate directly under the foreign company without creating a separate legal entity. This is useful for companies looking to execute specific contracts in Saudi Arabia.

Business Opportunities in Saudi Arabia

Saudi Arabia offers a unique and interesting landscape for new business opportunities, especially under its Vision 2030 initiative, which is going a long way towards diversifying the economy beyond just oil.

The kingdom is actively encouraging foreign investment in sectors like tourism, entertainment, mining, and renewable energy. As it opens up its economy, opportunities in the technology and innovation sectors are also greatly expanding.

Business Opportunity	Reasons
Renewable Energy	Saudi Arabia has set ambitious targets for renewable energy deployment, aiming to generate 50% of its electricity from renewables by 2030. The country’s vast solar and wind resources, combined with supportive government policies and substantial investments in mega-projects, present significant opportunities for investors in renewable energy development, manufacturing, and services.
Tourism and Hospitality	As part of its economic diversification strategy, Saudi Arabia is heavily investing in its tourism and hospitality sector. Mega-projects like the Red Sea Project and NEOM aim to position the country as a global tourist destination, offering unique experiences and luxury accommodations. There are opportunities for investors in hotel and resort development, tourism infrastructure, and entertainment facilities.
Manufacturing and Industry	Saudi Arabia is actively promoting the development of its manufacturing and industrial sectors, with a focus on high-value, innovative industries. The country offers competitive advantages such as low energy costs, a strategic location, and access to regional markets. There are opportunities for investors in sectors such as petrochemicals, automotive, aerospace, and pharmaceuticals, with the government providing incentives and support for industrial growth.
Healthcare and Life Sciences	With a growing population and increasing demand for quality healthcare services, Saudi Arabia presents significant opportunities in the healthcare and life sciences sector. The government is investing in healthcare infrastructure, medical cities, and research and development facilities. There are opportunities for investors in hospital and clinic development, medical equipment manufacturing, and digital health solutions.
Technology and Innovation	Saudi Arabia is actively promoting the development of its technology and innovation ecosystem, with a focus on areas such as artificial intelligence, cybersecurity, and digital transformation. The country has established dedicated technology parks and incubators, and is investing in research and development to drive innovation. There are opportunities for investors in tech startups, e-commerce, and digital services, with the government providing support and funding for entrepreneurship.

These business opportunities, among others, are supported by Saudi Arabia’s investor-friendly policies, streamlined business regulations, and ongoing efforts to create a conducive environment for foreign investment. As the country continues to implement its Vision 2030 reforms, diversify its economy, and invest in human capital development, the potential for business growth and success in Saudi Arabia is expected to remain strong.