The Kingdom of Saudi Arabia (KSA) is experiencing a massive transition under Vision 2030, which emphasizes economic diversification. The evolution and empowerment of the automotive industry are among the critical components of this vision.
The KSA government has introduced a step-by-step mechanism for investors and entrepreneurs looking to establish an automotive business to leverage Saudi Arabia’s progressive business landscape. If you are looking to set up a multi-service automotive business that caters to requirements such as car detailing and import of certified auto spare parts, among others, this guide is for you.
Here is everything you need to know.
1. Understanding the Market and Activity Codes
You need to first understand the legal framework for establishing a business in the KSA. Several business activities in Saudi Arabia are categorized under the ISIC (International Standard Industrial Classification) system.
For investors looking to operate a business that sells spare parts and provides detailing services, the appropriate activity codes must be selected for business registration. Mostly, such services are combined under a general automotive services license, or businesses can also register a primary activity along with multiple secondary activities.
Regardless of the route you take, it is essential to carefully understand and meet all legal requirements to avoid potential delays in necessary approvals. Investors must verify the correct combination of activities with the Ministry of Commerce (MC) to ensure successful commercial registration of their automotive business in the KSA.
For such businesses, a potential plan for defining primary and secondary activities could be as follows:
Primary Activity: Maintenance and repair of motor vehicles (includes detailing).
Secondary Activity: Retail sale of automotive parts and accessories.
2. Investment License (For Foreign Investors)
The license requirements vary for local and foreign investors. For foreign nationals, the process starts with acquiring the initial license from the Ministry of Investment of Saudi Arabia (MISA). An MISA license is mandatory to own 100% of the business or to enter a joint venture.
Key MISA Requirements:
Service License: Required for car detailing and repair.
Trading License: Required if the business intends to import and sell spare parts directly.
Financial Solvency: Proof of financial capability (audited financial statements) from the investor’s home country entity is typically required.
3. Commercial Registration (CR) and Government Documentation
Upon acquiring the MISA license, the next step is to obtain the Commercial Registration (CR) approval from the Ministry of Commerce. Following this approval, the business must apply for the registration of:
Zakat, Tax and Customs Authority (ZATCA): For VAT and tax filing.
Ministry of Human Resources and Social Development (MHRSD): To open a file for hiring employees and issuing visas (Iqama).
General Organization for Social Insurance (GOSI): For employee social security.
4. Regulations for Car Spare Parts (Import and Trading)
A general criterion is in place for verifying the quality of spare parts imported from global markets. The KSA authorities only approve the import of automotive spare parts that meet the quality standards already in place.
SASO Certification: The most crucial quality standard for the import of automotive parts in the KSA is the SASO certification. It involves the approval of Metrology and Quality Organization after successful quality testing of car parts before they enter the market.
SABER Platform: The auto spare part Importers must register their products on the SABER electronic platform. This is a digital system that ensures imported spare parts comply with the technical regulations. Approval through this platform is provided in the form of a Certificate of Conformity (CoC), required for customs clearance.
Note: Failure to register parts on SABER will result in shipments being held at customs.
5. Municipal and Operational Requirements for Detailing Centers
Once all the above requirements are completed, the next step is to set up a physical location for the car detailing and spare parts business. This requires a Municipal License (Rakhsa Baladiya) issued by the Ministry of Municipal and Rural Affairs and Housing (MOMRAH).
Specifications for the Physical Location of a Business:
Zoning & Space: Business owners must look to rent or purchase a property in an area that is commercially or industrially approved for automotive services. The property must have sufficient separate spaces/compartments for all the services that can be offered under the automotive license.
Waste Management: The business property must have adequate installations for appropriate waste management, and relevant certified drainage and disposal companies must approve it.
Civil Defense: A Civil Defense license is mandatory. This involves installing fire suppression systems, alarms, and emergency exits, which are critical for facilities storing flammable car care products or rubber tires.
6. Saudization (Nitaqat)
The automotive sector is a key focus for Saudization (the replacement of foreign workers with Saudi nationals). The Ministry for Saudization has established specific quotas for automotive maintenance and sales jobs to establish a workforce balance that contains both foreign and local workers. Businesses must meet all requirements to obtain Green status in the Nitqat System, which enables continued visa issuance and operational stability.
Summary of Setup Process
Conclusion
Starting an automotive company in Saudi Arabia that combines spare parts trading with car detailing requires navigating multiple regulatory bodies. By securing the correct MISA license, adhering to SASO standards for parts, and complying with municipal zoning for detailing operations, investors can tap into a lucrative and growing market.
However, as explained above, obtaining all the approvals can be highly complicated, especially for foreign nationals. This is where Cartrix helps its customers from around the world looking to establish an automotive business in the KSA. The experienced team of immigration, visa, banking, and tax experts ensures that you enjoy a hassle-free journey towards establishing a successful business entity in the Kingdom of Saudi Arabia.
Book a meeting with our experts today to start exploring your options for setting up an automotive business in Saudi Arabia.
