Opening a sole trader in Saudi Arabia is the simplest way to start a business in this country. Also known as an establishment, it is suitable for single entrepreneurs who can carry out a professional or commercial activity on their own.
Below, our company formation agents in Saudi Arabia explain the requirements to open a sole proprietorship. We are at your disposal with various solutions if you want to operate through this business form.
Table of Contents
Steps to open a sole trader in Saudi Arabia
If you plan to create an establishment (sole trader) in Saudi Arabia, you must undergo the following procedure:
- prepare the necessary documents;
- file them with the Ministry of Commerce;
- apply for the necessary business permit in accordance with your activity;
- register for taxation and VAT;
- enroll with the Ministry of Labor;
- register with the Human Resources and Social Development.
There are several requirements to comply with when setting up a Saudi sole trader.
Documents to create a Saudi sole proprietorship
One of the advantages of opening a business in Saudi Arabia as a sole trader is the few papers required for registration. Specifically, you will need to supply:
- your ID if you are a Saudi national;
- the Saudi residence permit if you are a foreign citizen;
- information about your qualifications (diplomas, accreditations, etc.);
- proof of local address.
They will be filed with the Ministry of Commerce, which will issue the registration certificate in a few working days. However, please note that the entire process can take up to 60 days due to licensing requirements.
Conditions to launch an establishment in Saudi Arabia
It is possible for both Saudi and Gulf Cooperation Council nationals to open sole proprietorships here without restrictions. Foreign nationals must:
- obtain Saudi residence permits or Iqamas prior to starting the registration process;
- ensure they are not restricted from carrying out their activities (some business sectors are restricted to foreigners).
Also, the sole proprietor must be at least 18 years old and must have a clean criminal record. Additionally, the person cannot be a government employee at the time of registration.
Another requirement to consider when choosing this business form is the minimum capital of SAR 5,000.
Following that, the future sole trader must:
- choose and register a unique name;
- draft the registration papers, which must also include information about their qualifications;
- create a feasible business plan;
- secure a local registered address;
- open a local bank account.
Our Saudi company formation consultants can assist with PRO services related to the creation of the registration papers, especially if you are a foreign businessperson.
Taxation of sole traders in Saudi Arabia
Establishments (sole traders) must comply with various tax requirements in Saudi Arabia, as they are liable for the following levies:
- the value added tax, which is imposed at a standard rate of 15%;
- the income tax of 20% which is levied on the net adjusted profits of the business;
- the Zakat, which applies to Saudi nationals only, and is levied as a solidarity surcharge of 2.5% of one’s income.
Our Saudi accountants can assist in various financial matters related to your sole proprietorship.
Why open a sole trader in Saudi Arabia?
If you want to set up a business in Saudi Arabia as a foreigner and decide on a sole trader, you can benefit from the following:
- simple registration and compliance requirements;
- access to all the profits generated by the business;
- the possibility to work alone or hire employees, including foreigners.
If you want to set up an establishment in Saudi Arabia and need assistance, please contact us.