A foreign investment in a contracting company in Saudi Arabia is a strategic option. Undoubtedly, foreign investors taking this step will face some challenges. Obtaining proper professional advice will minimize or eliminate all these challenges.
Saudi Arabia’s construction industry is expanding. With the impending implementation of Saudi Vision 2030, Giga projects in the Kingdom will require some type of building. However, accessing the Saudi market can be perplexing because of different rules. Applying to different organizations, with elements varying based on whether you are a foreign-only company. We’re here to make your life easier.
Expanding to Saudi Arabia
According to Invest in Saudi, the Kingdom’s GDP per capita is $23,570, with a stock of 230.8 billion dollars in FDI and a nominal GDP of 782 billion dollars. These are the highest figures in the region. Furthermore, the Kingdom recently permitted foreign loans, which is a significant and welcome development.
The Kingdom aspires to be thought leaders in all fields, including construction. In the first quarter of 2021, the construction industry in the Kingdom grew by 2.7 percent in real GDP, with 78 new construction investment permits issued.
As Saudi Arabia strives to meet the needs of growth. An infusion of foreign construction corporations is obvious and will continue. Construction cranes and other construction machinery have been hasty transports to Saudi Arabia as the building sector in neighboring Middle Eastern countries slows, allowing construction companies to take advantage of available employment.
In the last five years, the construction business has spent $300 billion, and by 2025, roughly 400 thousand units will have been erected utilizing modern construction methods and innovative technologies.
Setting Up a Contracting Company in Saudi Arabia
The most important consideration for a foreign contracting company in Saudi Arabia is to conduct due diligence on their proposed investment in Saudi Arabia. Consultation with Saudi legal counsel is essential to ensure that the correct structure and overall setup are achieved to maximize results. You should also seek advice from tax and other financial advisors. When deciding to establish an investment vehicle in Saudi Arabia, the MISA will require a foreign investment license.
After the foreign investment license is issued, it will need to be registered with other government departments, such as the Ministry of Industry and Commerce, the Ministry of Zakat and Taxation, the Ministry of Labor, the Chamber of Commerce, the General Organization of Social Insurance, and local government departments. City Hall.
Saudi Arabian General Investment Authority issues the Investor License, which enables you to open a 100% foreign investment in Saudi Arabia. You don’t need a local partner and can operate anywhere in the Kingdom. Please note, that certain conditioning confines are similar to reclamation, medical, and consulting. The Ministry of Investment of Saudi Arabia provides accelerated investment operations, For foreign companies within 5 days of submission to SAGIA. SAGIA’s role is to interface with foreign investors and other Saudi General Authority of Investment to promote foreign investment. SAGIA “filters” to ensure that only reputable investors can enter the Kingdom of Saudi Arabia. Proof of industry experience and certificates is required.
Foreign Investment License Application:
A construction company incorporated can be a 100% foreign-owned entity, usually in the form of a limited liability company formation in Saudi Arabia. Such a company usually requires at least two shareholders, and these shareholders may be in the same company group. Corporate documentation (board/shareholder resolutions, constitutional documents, registrations)
- A power of attorney authorizing a local representative to facilitate matters
- Shareholder information
- Audited financial statements – going back at least a year
- References
- Projects completed
- Construction classification – rating/grade
- Bank statements
While the above information does provide a broad overview, there are exemptions available. The Saudi Arabian General Investment Authority has a great deal of discretion.
Grading of Contracting Companies in Saudi Arabia
As mentioned above, the classified copy of the foreign investor needs to come from its home jurisdiction. According to the Contractor Classification Law (and implementing regulations), the Ministry of Municipal and Rural Affairs of Saudi Arabia (“MOMRA”) can obtain the classification. This local classification is usually a mandatory requirement for construction contracts. Especially when the client is the Saudi government or government authority. The classification level will determine the contract type and value allowed by the contractor. For example, a level 1 contractor can sign a construction contract of more than $74.66 million, while a level 5 company can only sign a contract of up to $1.86 million.
The classification level of the jurisdiction where the foreigner is located does not automatically correspond to the level in Saudi Arabia. MOMRA will make classification decisions based on the merits of a particular applicant (including experience and previously completed projects).
Foreign investors need to pay attention to whether they meet all the construction contract standards, because in general, government authorities will require the contractor to set up a local agency, and the payment can only be deposited into the local bank account. Contracting companies in Saudi Arabia can also get concessions when signing government contracts. Foreign investors should also conduct legal reviews of any construction contracts before signing.
Partnership with Business Link
Our team will always be there to resolve all of your major and minor doubts related to business formation. We believe that it is clear to you what the Saudi Arabian General Investment Authority is and how the services from Business Link can be beneficial for you when you are going to start a business in Saudi Arabia. Business Link consultants will guide you through the contracting company setup process in this blog. Business Link consistently sets up 100% remotely possessed substances under the Saudi Arabian General Investment Authority “SAGIA” guidelines and makes venturing into the KSA quick, simple, and incredibly financially savvy.
