Requirements and steps to issue a commercial registration in Saudi Arabia

Imagine that by the end of 2023, the number of commercial registrations in the Kingdom of Saudi Arabia reached 1.397 million commercial registrations, with a growth rate of 23% over the corresponding quarter of 2022. Commercial registrations for e-commerce activities also saw a growth rate of 24%, according to the Business Sector Bulletin for the fourth quarter of 2023 issued by the Saudi Ministry of Commerce.

These figures reflect the extent of the growing business market in the Kingdom, and the necessity of issuing a commercial registration for anyone who wants to launch their commercial activity, as it is an important tool for regulating commercial activities in the Kingdom, and contributing to enhancing transparency and reliability in various institutions in the market. It also plays a pivotal role in creating a thriving and conducive commercial environment for commercial businesses, as well as protecting the rights of consumers and commercial partners by providing transparent information about registered companies and individuals, thus contributing to enhancing trust among all concerned parties.

However, issuing a commercial registration has important conditions, considerations, and steps that must be followed, all of which we will reveal in this article.

First, what is the concept of a commercial registration?

A commercial registration is an official database established by the state to document information related to commercial and economic activities practiced by individuals or companies. This register includes essential details such as the name of the merchant or institution, the type of commercial activity, the address of the main headquarters, the date the activity started, the capital, and the names of partners, if any. Each commercial activity is granted a unique number known as the commercial registration number, which is used in official transactions to accurately identify the establishment.

The commercial registration is considered the legal identity of the commercial activity, as it proves its actual existence and recognition by the regulatory authorities in the state. An activity is not considered legally based unless it has a commercial registration, which makes it an essential requirement for practicing commerce systematically. The commercial registration also contributes to unifying and updating commercial activity data, which facilitates referring to it when needed, whether for statistical, regulatory, or legal purposes.

We point out that the commercial registration has multiple types that we review in this paragraph.

Types of Commercial Registrations in the Kingdom of Saudi Arabia

There are four types of commercial registrations that you, as a commercial activity, can issue in Saudi Arabia, and each has specific issuance conditions.

• Commercial Registration for an Institution:

This is for establishing ordinary for-profit commercial businesses and practicing economic activity. The cost of issuing a main commercial registration is 200 riyals, and a branch registration is 100 riyals.

•  Commercial Registration for a Limited Liability Company:

This is a single-person company, in which the financial liability of the company is separate from the financial liability of the partners. The cost of issuance is 1200 riyals for the main commercial registration and 600 riyals for the branch registration.

• Commercial Registration for a General Partnership Company:

This is a company whose partners are all individuals and are personally and jointly liable for the company's debts and obligations with all their assets. The cost of issuing the main registration for this type of company is 800 riyals and 400 riyals for the branch registration.

• Commercial Registration for a Simple Limited Partnership Company:

These are simple companies consisting of two teams: the "general partner" who is responsible for the company's debts and obligations, and the "limited partner" who is only responsible within the limits of their share in the company's capital. The cost of issuance is 800 riyals for the main registration and 400 riyals for the branch registration.

It is necessary to note that a branch registration is not required if the desire is to engage in the same commercial activity in the same administrative region and with the same existing trade name.

Conditions for opening a new commercial registration in Saudi Arabia

The process of opening a new commercial registration in Saudi Arabia requires several important conditions set by the Ministry of Commerce, which include:

• Adulthood: The applicant must be at least 18 years old.

• Nationality: The applicant must be a Saudi national.

• Capital: The capital for the commercial activity must not be less than 5000 Saudi Riyals.

• No previous commercial registrations: The applicant must not own another commercial registration for the same activity.

• Absence of judicial rulings: The applicant must not have any judicial rulings against them that prevent them from practicing commercial activity.

• Not working in government jobs: Government employees are not allowed to open commercial registrations to enhance transparency.

• Establishment Name: The trade name must be unique and not used by another commercial establishment.

• Type of Establishment: The type of establishment must be specified, whether it is an individual establishment, a limited liability company, or a joint-stock company.

• Payment of required fees: The value of which differs depending on the type of registration, as explained in the previous paragraph.

These are the general conditions that must be observed for issuing a commercial registration in Saudi Arabia, and there are other conditions related to each type of commercial registration that can be viewed on the Saudi Business Center Platform.

Steps to issue a new main or branch commercial registration in Saudi Arabia

The process of opening a new commercial registration requires several steps, which are:

• Accessing the Saudi Business Center Platform.

• Selecting the type of commercial registration you wish to issue and clicking the "Start Service" button.

• You will be directed to the login page via the National Unified Access.

• Fill in the data related to the commercial activity, including the trade name, address, contact information, and type (individual, company, institution).

• Specify the applicant (owner of the institution or authorized person).

• Fill in the registration and fiscal year data.

• Review all the data you entered accurately and attach an acknowledgment of the correctness of the entered data, then click the submit application button.

It is worth noting that a commercial registration can be

• There is no labor tied to the commercial registration.

• The registration is not main and does not have branches.

• The commercial registration is not linked to a license.

• There are no obligations regarding the Zakat, Tax and Customs Authority.

Now you can issue and immediately obtain an electronic commercial registration

The Saudi Ministry of Commerce has provided an electronic service that allows you to issue a commercial registration without the need to visit any government agency. It is a document issued by the Ministry of Commerce that includes all important data about the merchant and their actual commercial activity.

There are many advantages that the electronic commercial registration offers to merchants, such as:

• Issuing the commercial registration immediately in a record time compared to the traditional method.

• The possibility of linking the commercial registration with other official bodies (such as the Chamber of Commerce).

• Registering the establishment for Zakat through the electronic portal of the Zakat, Tax and Customs Authority.

• Registering the establishment in the General Organization for Social Insurance.

• Registration in the National Address with Saudi Post (Subul).Issuing a unified invoice showing the costs of the commercial registration and the Chamber of Commerce membership.

• Eliminating the need to visit government agencies, which saves time and effort for business owners.

Can foreigners and residents in Saudi Arabia open a commercial registration?

Yes, a foreign expatriate or resident in Saudi Arabia can issue a commercial registration with the same previous conditions, but in the event that their partner is a Saudi national and applies on their behalf to issue the commercial registration, and if there is no partner, it is necessary to meet the following conditions:

• The applicant must be at least 18 years old at the time of application.

• The necessity of bringing a clearance letter from the Saudi sponsor.

• The investment activity to be practiced must not be one of the activities prohibited for foreign investment in Saudi Arabia.

• If the resident is a partner in the commercial activity to be practiced, they must have a residence permit under the sponsorship of the entity applying for the commercial registration.

• The investor's sponsor must be a Saudi national and own at least 51% of the company's assets.

As for the application steps, they must:

• Submit an official request to the competent authorities represented by the General Investment Authority.

• Attach a copy of the company's incorporation contract, preferably certified by the Saudi embassy in the foreign investor's country.

• Ensure the availability of the required information and data in the contract, such as the company's capital, name, type of commercial activity, etc.

• The necessity of registering with the Chamber of Commerce and Industry, the General Organization for Social Insurance, the Passports Directorate, and the Ministry of Interior upon approval of issuing the registration and granting the commercial activity the necessary licenses.

If you wish to open a commercial registration for your electronic store, here are the most important conditions to consider.

Required conditions for issuing a commercial registration for an electronic store:

The conditions for issuing a commercial registration for an electronic store do not differ much from the general conditions that were reviewed, which are:

• The applicant must be at least 18 years old.

• Must not be a government employee.

• The capital provided for the purpose of implementing the activity must not be less than 5000 riyals.

• The applicant must be a Saudi national, and if not Saudi, the necessary licenses and approvals must be obtained to practice the commercial activity in the Kingdom.

In addition to these general conditions, the Saudi E-Commerce Council has imposed some other conditions to guarantee consumer rights, which are:

• The necessity of providing various means of communication, including email, mobile number, and instant messaging applications.

• Providing reliable and secure payment options through accredited banking channels or payment gateways.

• Clarifying the time required for product delivery before completing the purchase process, and stating this in the invoice.

• Having a clear and written policy regarding exchange and return operations.

For these reasons, you must issue a commercial registration for your store or commercial activity

There are multiple reasons that make it necessary for merchants to open a commercial registration to practice their commercial activities freely in the Kingdom, including:

• Providing transparent and reliable information about registered companies and individuals

Important details are recorded in the commercial registration, such as the company name, type of commercial activity, main headquarters address, date of establishment, and information of shareholders or owners. This information helps build relationships and enhance trust among the concerned parties, as well as provide a knowledge base for making informed investment decisions.

• Providing legal protection for commercial businesses and the rights of consumers and commercial partners

By issuing a commercial registration, the entity responsible for the commercial work is determined, and the rights and obligations of the commercial activity are defined. The commercial register can also be used as legal evidence in the event of commercial disputes or legal issues.

• Accessing markets and enabling commercial cooperation through the commercial registration

It is a guide for commercial activities and individuals wishing to enter commercial markets. For example, other parties such as customers, suppliers, and commercial partners can view the commercial registration to verify the company's strength and reliability before establishing commercial relations with it. Issuing a commercial registration contributes to facilitating commercial cooperation and enhancing trust among the concerned parties.

• Obtaining financing from various financial institutions

Increases the chances of obtaining bank loans or investments from investors to support the company, achieve financial sustainability, and enhance growth.

• Benefiting from a variety of services

Which help merchants organize their commercial businesses affiliated with them in the Kingdom, including: setting up an electronic store on e-commerce platforms such as Salla platform, ease of renting and owning a physical store for the commercial activity, using electronic payment gateways that facilitate sales and purchase processes, and benefiting from the services provided by the Ministry of Commerce to merchants.

In general, the commercial registration is of great importance to various commercial activities and companies, as it helps ensure that companies operate responsibly and ethically, and that investors, creditors, and other stakeholders have access to the information they need to make informed decisions.

It is worth noting that there is a lot of information included when issuing a commercial registration for commercial activity, which differs between countries.

Key information included in the commercial registration

• Ownership information, including details about the shareholders or members of the commercial activity, including their names, addresses, and ownership percentages.

• Financial information, including details related to the company's financial performance, such as annual revenue, net income, and assets.

• Tax information, which is sometimes included when opening a commercial registration, such as the Value Added Tax (VAT) number or the General Sales Tax (GST) number.

• Historical information about the company with the relevant government agency, including, for example: annual reports, changes affecting company managers or officials, or changes in its legal structure.

We draw attention to the fact that failure to open a commercial registration for a commercial activity results in many legal and commercial consequences and damages.

Effects of not opening a commercial registration in Saudi Arabia on merchants

Failure to open a commercial registration in the Kingdom of Saudi Arabia results in a number of legal and commercial consequences and damages, including:

• Legal penalties:

Saudi authorities may impose legal penalties on individuals or companies that practice any commercial activity without a commercial registration. These penalties include financial fines, and may reach the closure of the commercial activity.

• Failure to obtain rights and privileges:

Opening a commercial registration allows the company to benefit from specific rights and privileges, such as obtaining bank financing, participating in government tenders, obtaining special commercial licenses, and officially dealing with banks and financial institutions.

• Loss of transparency and trust:

The absence of a commercial registration leads to a loss of transparency and trust from customers and commercial partners. Customers may hesitate to deal with an unregistered company, and it may be difficult for the company to establish strong and sustainable commercial relationships due to this lack of trust, which in turn affects the growth of the commercial activity.

• Inability to protect intellectual property:

The commercial registration provides legal protection for the company's intellectual property rights, such as trademarks and copyrights. Without a commercial registration, it may be difficult to enforce intellectual property rights and protect the commercial activity from infringement.

Therefore, we emphasize the need to fulfill legal requirements and open a valid commercial registration in Saudi Arabia to avoid these potential consequences and damages and ensure that the commercial activity operates legally and sustainably.

The most prominent frequently asked questions related to issuing a commercial registration in Saudi Arabia:

What is the duration of the commercial registration?

From one year to five years, and the time period can be renewed afterward.

What are the available payment methods for opening a commercial registration?

There are many payment methods provided by the Kingdom to pay commercial registration opening fees, including, for example:

• Payment through the Sadad service provided by the Kingdom to facilitate the payment process for users.

• Payment through Mada cards provided by Saudi banks.

• Payment through credit cards such as Visa and MasterCard.

Is it possible to start an e-commerce activity without issuing a commercial registration?

Yes, by issuing a freelance work document from the Freelance Platform affiliated with the Ministry of Human Resources and Social Development.

Are there fees for printing a commercial registration?

The Kingdom does not impose any fees for printing the commercial registration.

Can more than one commercial activity be practiced on one commercial registration?

Yes, it is possible to practice more than one commercial activity on one commercial registration.

What are the conditions for transferring ownership of a commercial registration?

• The age must not be less than 18 years.

• The buyer must not be a government employee.

• The necessity of paying the dues related to the General Organization for Social Insurance in case of a subscription.

• The commercial registration name must not be the personal name of the seller.

• The commercial registration must not be suspended or expired.

• If the owner of the registration is a government employee or the commercial registration name is the personal name, the transfer is done manually through the branch.

What are the reasons for my store's documentation failure?

The most important reasons are summarized as:

• The absence of a commercial registration or a freelance work document, as documentation requires official proof of the commercial activity, either with a commercial registration issued by the Ministry of Commerce or an approved freelance work document from the Freelance Platform affiliated with the Ministry of Human Resources.

• Discrepancy between the store data and the commercial registration, such as a difference in the electronic store name or the actual activity displayed on the site from the data registered in the commercial registration or the freelance work document.

• The absence of a reliable electronic payment method; the competent authorities require the presence of a licensed and activated electronic payment method, such as Mada, STC Pay, or other approved payment gateways in Saudi Arabia.

• Violation of the e-commerce system conditions, such as not displaying the exchange and return policy, not clarifying contact details, or the absence of shipping and warranty information on the site.

• Not linking the store to the National Address, as one of the essential conditions for documentation is the existence of an activated National Address in the name of the store owner or establishment, and it must match the registration data.

• Weak store credibility or previous complaints; in the event of official complaints or recurring negative evaluations, the documentation may be rejected or postponed until the situation is corrected.

Is it possible to document a new store that does not contain products?

Yes, it is possible to document a new electronic store that does not contain products yet, but with specific conditions:

• That you have a valid commercial registration or a freelance work document.

• That the store includes a clear identity (name, logo, activity description).

• That the operating policies appear on the site, such as: shipping, payment, exchange and return, and means of communication.

• That the store is technically functional (i.e., it works properly when accessed, even if products have not yet been listed).

The documentation process is rejected in the following cases:

• The presence of a link to an inactive or under construction store (such as a page under development).

• Complete absence of any introductory content or legal information on the site.

• Failure to enter any data indicating the seriousness of the activity (even if there are no current products).

Advice, if the store is new and does not contain products, it is preferable to at least include samples or models of expected products or activated categories, so that it reflects the existence of a real business plan when applying for documentation.

Finally, general guidelines for professionally issuing a commercial registration in the Kingdom:

• Determine the type of commercial activity you wish to engage in and ensure that it complies with Saudi laws and regulations. It may be best to consult a legal advisor to ensure compliance with local legislation.

• Ensure the availability of the trade name you want and check that it is not used by other establishments.

• Gather all required documents to submit the commercial registration issuance application, such as the owner's personal identity, a clear copy of the lease or ownership contract for the commercial location, certificates of incorporation and contribution (if any), and other documents related to the commercial activity.

• Be sure to review the latest updates on the Ministry of Commerce requirements before submitting the commercial registration issuance application.

• Submit the commercial registration application to the competent authority, follow the specific instructions accurately, and ensure that all required documents and correct information are attached.

• Ensure compliance with all local tax and financial requirements. You may need to register with the General Authority of Zakat and Tax and obtain a Value Added Tax (VAT) number if your commercial activity is subject to these types of taxes.

• Do not hesitate to contact the Ministry of Commerce customer service or the Saudi Business Center if you encounter any difficulties.

Know that issuing a commercial registration is the first step in the journey of establishing your commercial establishment, so you must ensure that all conditions are met and all steps and procedures are followed accurately and professionally to ensure you obtain a valid commercial registration that guarantees you practice commercial activity easily without obstacles, contributing to promoting sustainability, growth, and achieving the maximum possible returns on investment.