Saudi Arabia is the largest economy in the Gulf and, for Indian contractors, engineering firms, IT companies and consumer brands, the market with the most to gain. It is also the one where the setup is most often underestimated. The licensing has become far easier since 2019; the tax, employment and contracting rules remain distinctive. Here is the sequence and what to budget for.
1. The licence
A foreign investor needs an investment licence from the Ministry of Investment (MISA) before anything else. The application is made online with the parent company's incorporation documents, audited financial statements for the last year and a board resolution, all legalised through the Saudi embassy in India or apostilled where accepted. Licence categories cover services, industrial, trading, contracting, real estate and others; the service licence is the most common for Indian professional and IT businesses, and 100% foreign ownership is permitted for most activities. Trading activities have historically carried a higher capital requirement and additional conditions. With the MISA licence in hand, the company obtains its commercial registration from the Ministry of Commerce, registers its articles, joins the Chamber of Commerce, obtains a national address and registers with ZATCA, GOSI and the labour platforms. A realistic timeline from complete documents to a functioning company with a bank account is eight to twelve weeks.
2. Tax: the 20% and zakat split
Saudi Arabia taxes by ownership. Profits attributable to non-Saudi / non-GCC shareholders are subject to corporate income tax at 20%; profits attributable to Saudi and GCC shareholders are subject to zakat at 2.5% of the zakat base. A wholly Indian-owned subsidiary therefore pays 20% on its adjusted profit. Withholding tax applies to payments from the Saudi company to non-residents: 5% on dividends and most services, 15% on royalties and management fees, 20% on some payments to related parties, reduced under the India–Saudi treaty where its conditions are met. VAT at 15% applies from the first sale once the SAR 375,000 registration threshold is crossed, and the Fatoora e-invoicing system requires compliant invoice generation and, for larger businesses, real-time integration with ZATCA. The annual return with audited accounts is due within 120 days of year-end.
3. People
Saudization (Nitaqat) sets minimum ratios of Saudi nationals by sector and company size, and a company outside its band cannot obtain new work visas or renew existing ones. Plan the headcount with the ratio in mind from the first hire. The general manager needs an iqama, obtained after the company is registered, and Indian staff are brought in on work visas linked to the company's quota. Professional licences are required for engineers, accountants and several other professions, and the process of verifying Indian degrees has become stricter.
4. The regional headquarters programme
Since 1 January 2024, Saudi government bodies contract only with multinationals that have their regional headquarters in the Kingdom. The RHQ programme licences a Saudi entity that performs the group's regional strategic direction and management functions for the MENA region — planning, budgeting, financial monitoring, marketing strategy and M&A support as mandatory activities, plus at least three optional ones such as HR, accounting or logistics. In return it receives a 30-year exemption: 0% corporate income tax on income from eligible RHQ activities and 0% withholding tax on dividends, related-party payments and service fees to non-residents, subject to economic substance — a physical office, decisions and board meetings held in the Kingdom, at least one Saudi-resident executive, and at least 15 full-time employees within the first year. For Indian groups selling to Saudi government entities, an RHQ is no longer optional; for others it is a genuine tax opportunity if the substance is real.
5. Banking and cash
Corporate bank accounts open only after the commercial registration and, in practice, after the general manager's iqama; expect four to eight weeks. Capital is injected after registration. Profit repatriation is free of exchange control once tax and zakat are settled; keep the audited accounts and tax clearance ready for the bank.
6. The Indian side
The investment is ODI under the Overseas Investment Rules: Form FC through the AD bank before the first remittance, a UIN, the share certificate within six months and an APR every December. The Saudi company's dealings with the Indian parent — secondment of engineers, sale of equipment, management fees — are between associated enterprises and fall under Indian transfer pricing and Form 3CEB. Saudi withholding tax on payments to India is creditable in India under the treaty with a Form 67 claim. And, as with every foreign subsidiary, the company must be managed from the Kingdom, not from Mumbai, to keep its profits outside Indian tax.
A joint engagement
We prepare the MISA and CR file, work with a licensed Saudi provider on the ground, and handle the Indian ODI, transfer pricing and treaty side from Mumbai. Read about our Saudi service or contact us.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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