After understanding the CapEx costs (hard costs and setup partner fees) involved in establishing a business in Saudi Arabia, the next important aspect to consider is the annual operating costs (OpEx).
OpEx encompasses the ongoing operational expenses required to sustain a business in the country. This includes government fees, renewals, taxes, third-party costs, and other essential expenditures crucial for maintaining seamless business operations and preventing any unwelcome surprises.
In this article as part of our Saudi Expansion series, we aim to provide a clear and comprehensive overview of the operational costs after landing. This article marks the third installment in our series focusing on the various costs associated with establishing and maintaining a business in Saudi Arabia.
Note: All facts and figures have been simplified for clarity and for a more accurate and in-depth review it would be best to consult Tawaref.
First: Corporate Annual Renewal Fees
Corporate annual renewal fees are all those costs that are related to maintaining your company https://www.wamda.com/author/tawarefhttps://www.wamda.com/author/tawarefregistration and status to legally operate in the country. Some of these fees overlap with hard costs, which we discussed in a previous article.
Fee | Type | Description |
MISA/Investment License Renewal | Gov | Traditional Licenses:
Entrepreneurial (Tech) License:
Regional Head Quarter RHQ:
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Company Registrations Renewals | Gov | 1,200 SR for Limited liability companies 1,600 SR for listed companies One time fee of approximately 500 SR to publish company in newspaper |
Chamber of Commerce Subscription Renewal | Gov | Different price Categories based on the business type and size: Starts from 300 SR/annual and goes up to 5,000 SR. Currently waived for new entrants for the first three years. |
National Address Renewal | Gov | Address is free for the first year. 1,000 SR for limited liability companies |
Municipality Certificate Renewal | Gov | Municipality certificate is required to operate a retail shop in Saudi The fee depends on factors such as: size and type of the property, whether a cleaning service is required, size of the sign board, etc. Fee ranges from 6 to 10 SR per square meter. An additional 1,000+ SR for the sign board are also charged.. |
Specialized Licenses Renewals (Activity-Based) | Gov | Certain types of business activities and industries require specialized mandatory licenses that come with their own annual renewal fees. This includes healthcare, educational institutions, financial institutions, manufacturing etc. The prices and the categories are complex. For instance, the renewal fee for a vocational training center might start at 2,000 SR while the license to import medical equipment might go up to 25,000 SR. For further pricing inquiry, kindly reserve a consultation with Tawaref |
Second: Labor Related Costs
Labor-related costs in Saudi Arabia pertain to expenses associated with employing both Saudis and non Saudi workers, and meeting labor-related regulations.
Fee | Type | Description |
Work Permit Renewal (For non-GCC Workers) | Gov | SR 800 per month, and this can be paid for a minimum of three months |
Residency/Iqama Renewal (For non-GCCSaudi Workers) | Gov | Approximately SR 650 per year for any non-GCC employee. With a few exceptions, this includes the GMs of the company even if they are the owners themselves. |
Social Security Contributions | Non-Saudis:
Saudis: 11%
Note: Another 9% is paid by the employee summing up to 18% pension contribution. | |
End of Service Contribution (All Workers) | Although it is only applicable to departing workers, End of Service is a crucial operational expense. In Saudi Arabia, every worker, irrespective of nationality, is entitled to half a month's salary for each year of service, provided they have worked a minimum of two years. After a decade with the same employer, this benefit doubles to a full month's salary per year worked. For instance, leaving after nine years warrants 4.5 months' salary, while departing after ten years entitles the employee to 10 months' salary. | |
Medical Insurance (All workers and their family members) | All private sector employers are required to insure all their employees and their families, with price depending on factors like the individual’s age, number of dependents, plan tier, health issues, and also the employer company size. Big employers enjoy cheaper prices due to volume discounts At the very lowest end, the cost starts at 1000 per year per person. However, the most expensive plans with greater coverage and network can even reach SAR 13,000 annually. | |
Qiwa & Muqeem Portals Annual subscription Fee | Qiwa is the national platform for managing workforce (both Saudis and Non) including contracts management, work-permits issuance etc. .. Muqeem, on the other hand, is the portal for managing non-Saudi workers and their families iqama/residency and exit/entry visa Qiwa and Muqeem are both paid portals, with pricing for both based on the number of employees. Qiwa: 1,300 - 7,000 SAR annual Muqeem (Full Package): 1,100 - 7,500 or 11 SR / employees (for large organizations) | |
Exit/Entry Visas (non-GCC workers) | Gov | All non-Saudi residents, including workers and family members (except premium residents), must obtain an exit/entry visa before leaving Saudi Arabia. Options include a single-entry visa for a flat fee of 200 SR or a multiple-entry visa priced at 200 SR per month of validity, totaling 2,300 SR per year. |
Third: Taxes
Saudi businesses are subject to various tax obligations to support the nation’s economic growth and development. Mandatory taxes every business is mandated to fulfill are as follows:
Fee | Type | Description |
VAT (Value Added Tax) (All Entities) | Gov | In Saudi Arabia, VAT is a standard 15% on all business transactions. The tax rate is the same regardless of whether the sale is conducted inside or outside the country. Companies with under 100,000 annual revenue are waived from VAT. |
Corporate Income Tax (Foreign Owned Entities) | Gov | A flat 20% applies to the net income generated during an entire year of the foreign businesses. It is important to note that this is corporate income tax, not personal. Personal income tax does not exist in Saudi Arabia, neither on citizens nor on expats |
Corporate Zakat (All Entities) | Gov | Zakat is an obligatory Islamic tax collected by the state. It is approximately 2.5% of the Zakat Base. Zakat Base can be calculated as: total sources of funding – fixed assets. |
Withholding Tax (All Entities) 5-20% | Gov | Withholding tax applies to payments from Saudi sources to non-residents, ranging from 5% to 20% depending on the category of service. The paying entity in Saudi Arabia is responsible for reporting, collecting and submitting the tax. For instance, hiring a foreign training provider involves deducting 15% of their income and submitting it within a month of the payment clearance. |
Fourth: Third-Party Costs
Third-party costs for a business include expenses for services provided by external entities, such as auditor fees and dependents. Efficient management of these costs is essential for financial health and operational efficiency.
Fee | Type | Description |
External Auditor Fees (Foreign Owned Entities & Large GCC entities) | Non-Gov | All foreign owned companies (and large scale GCC companies) are required to submit externally-audited financial statements, with fees subject to company size, audit firm, experience, etc. For a startup, you can expect a number anywhere between SAR 10k - 15k SR per year. This can go all the way up to SAR 50k-75k/annum for a mid size retail |
Office Rent | Non-Gov |
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Dependent Fee (Non-GCC Family Members) | Non-Gov | Every non-Saudi dependent resident in Saudi (excluding premium residents and spouses of GCCers) must pay a fee of SAR 400/month for each dependent, defined as a non-working family member including spouse and children of the working residents. |
Saudi Expansion Series
This article is part of the Saudi Expansion series, aiming to educate international entrepreneurs and business owners on Saudi Arabia's foreign investment regime for a smooth landing. With a focus on original, technical, and informative content, our goal is to get business owners closer to securing that first riyal in their pocket.