1. Which economic sectors are available to investors and also licensed by the Saudi
Arabian General Investment Authority (SAGIA)?
The Saudi law permits foreigners to invest in all sectors of the economy, except for specific activities mentioned below:
1. Industrial Sector
a. Oil exploration, drilling and production, except the services related to mining sector listed at CPC
5115+883 in International Industrial classification codes.
b. Manufacturing of military equipment, devices and uniforms.
c. Manufacturing of explosives for civilians
2. Service Sector
a. Catering to military sectors.
b. Security and detective services.
c. Real estate investment in Makkah and Madinah.
d. Tourist orientation and guidance services related to Hajj and Umrah.
e. Recruitment and employment services including local recruitment offices.
f. Real estate brokerage.
g. Printing and publishing. Except the following activities:
• Pre-printing services internationally classified at CPC 88442
• Printing Presses internationally classified at CPC 88442
• Drawing and calligraphy internationally classified at CPC 87501
• Photography internationally classified at CPC 875
• Radio and Television Broadcasting Studios internationally classified at CPC 96114
• Foreign Media Offices and Correspondents internationally classified at CPC 962
• Promotion and Advertising internationally classified at CPC 871
• Public Relations internationally classified at CPC 86506
• Publication internationally classified at CPC 88442
• Press Services internationally classified at CPC 88442
• Production, selling and renting of computer software internationally classified at CPC 88
• Media consultancies and studies internationally classified at CPC 853
• Typing and copying internationally classified at CPC 87505+87904
• Motion picture and video tape distribution services internationally classified at CPC 96113
h. Commission agents internationally classified at CPC 621.
i. Audiovisual and media services.
j. Land transportation services, excluding the inter-city passenger transport by trains.
k. Services provided by midwives, nurses, physical therapy services and quasi-doctoral services internationally
classified at CPC 93191.
l. Fisheries.
m. Blood banks, poison centers and quarantines.
2. What is the minimum capital requirement needed for the business activities?
3. What are the main areas of investment in the Eastern Province?
The main areas of investment in the Eastern Province are concentrated in the following sectors: oil, gas, petrochemicals, electricity, water, and minerals. These sectors are represented in the industry by Saudi Aramco (Oil and Gas), Sabic (Petrochemicals), Saudi Electric Company (Electricity and Water), Saline Water Conversion Corporation (Water), and Ma'aden (Minerals). Other important areas of investments are construction, metal processing, and packaging.
4. What are the investment incentives offered by Saudi Arabia?
Some of the incentives provided to the investors are:
• Unrestricted repatriation of profits and capital
• Loans from the Saudi Industrial Development Fund (SIDF) or other lending agencies
• Carrying over current tax losses into future years to offset taxes on future profits
• Shall pay, under current Saudi Arabia Income Tax Law (ITL), a maximum of 20% tax on corporate profits
above SAR100,000 (US$26,700)
• Duty-free importation of machinery and equipment required for the project
• Protection from double taxation
• Unrestricted transfer of funds to meet obligations associated with the licensed project..
5. Is there any difference in the investment incentives offered by different regions of Saudi
Arabia?
There is no difference in the investment incentives offered by different regions of the country.
6. How can I obtain a list of current and future projects in the Eastern Province?
A list of current and future projects can be obtained either by visiting the Investment Development Center at Asharqia Chamber or its website.
7. Can a foreign investor obtain loans in Saudi Arabia?
Yes, a foreign investor can obtain loans for investment projects in Saudi Arabia.
8.
What are the sources of funding for the investors?
There are several ways of funding investment projects in Saudi Arabia. An investor can seek loans from SIDF, the Public Investment Fund, the Real Estate Development Fund, or the Saudi Arabian Agricultural Fund for agricultural projects. The investor, prior to obtaining a loan, needs to acquire a license, provide a land deed or lease agreement (not necessary for agricultural projects), and submit a feasibility study for the investment project. The investor may, also, seek to obtain funds from several Saudi commercial banks, as well as regional and international financial institutions which are:
• Saudi commercial banks
- Arab National Bank (ANB)
- Al Jazira Bank
- Al Rajhi Banking and Investment Corporation
- Bank Al Bilad
- Banque Saudi Fransi
- National Commercial Bank (NCB)
- Riyad Bank
- Saudi American Bank (SAMBA)
- Saudi British Bank (SABB)
- Saudi Hollandi Bank (SHB)
- Saudi Investment Bank (SAIB)
• Arab Fund for Economic and Social Development (AFESD)
Focuses on funding economic and social development in the Arab world by financing public and private
investment projects and providing grants and expertise.
• Arab Monetary Fund (AMF)
In addition to facilitating payment, trade and various economic activities among member countries, the Fund
lends money to finance Arab development projects.
• The Arab Investment and Export Credit Guarantee Corporation
The Corporation facilitates Arab and non-Arab investments in member countries by providing them guarantee
coverage against non-commercial risks, and to Arab export credit, against commercial and non-commercial risks.
9. Can I use foreign funds to set up my business in Saudi Arabia?
Yes, an investor can use foreign funds to set up your business.
10. Is there a one-stop system in Saudi Arabia to simplify the procedures?
Yes, the Saudi Arabian General Investment Authority (SAGIA) is set up to handle all issues pertaining to investments in Saudi Arabia.
11. Is it difficult foreign investors to obtain the necessary licenses for investment projects?
No, it is not difficult to obtain licenses once the required documents are submitted to SAGIA on time.
12. Is it possible for foreign investors to own properties in Saudi Arabia?
Yes, foreign investors can own upto 100% of properties.
13. What are the types of entry visas issued by the government of Saudi Arabia?
The government issues four types of visas:
• Investor visas
• Business visit visas
• Employment visas
• Family visit visas
Foreign visitors can apply for visas through the Internet. Once qualified, they will be given a confirmation number through the web, which then enables them to submit the required documents to the nearest Saudi Embassy. If the documents are submitted on time, visas can be issued within 48 hours.
14. Are foreigners restricted from engaging in certain types of business?
Foreigners can conducted any type of business with the exception of those mentioned in question 1.
15. Are there any restrictions on foreign ownership of companies?
A foreign investor can own up to 100% of companies and properties depending on the type of business activity. You may check SAGIA to get more information.
16. What are the steps for establishing a company in Saudi Arabia?
The steps for establishing a company in Saudi Arabia can be found by downloading Foreign Investment Rules and Regulations e-book which is available in our website.
17. What is the tax rate on businesses in Saudi Arabia?
The tax rate on foreign investors is fixed at 20% on profit while indefinite losses are carried forward to the next year.
18. What is the Zakat tax and who pays for it?
The Zakat is paid annually by Saudi individuals and companies within the provisions of Islamic law as laid down by Royal Decree No. 17/2/28/8634 dated 29/6/1370 H. (1950). The Zakat is an annual flat rate of 2.5% of the assessable amount.
19. How many economic cities are there in Saudi Arabia?
There are six economic cities:
• King Abdullah Economic City
• Prince Abdul Aziz bin Mousaed Economic City
• Jazan Economic City
• Knowledge Economic City
• Tabuk Economic City
• Eastern Province Economic City
20. What is the Saudization ratio for all the companies?
Saudization is set at 75%.
21. Is there a mechanism to resolve disputes in Saudi Arabia?
Before entering into an agreement, it is important for a company to understand the procedures for resolving potential disputes. The company needs to consider whether they would like to use Saudi courts or courts of other countries, the type of Saudi tribunal in which the dispute will be resolved, and the possibility of arbitration.
Saudi Tribunals vs. Courts in Other Nations
If a dispute arises between a foreign company and a Saudi party, the foreign company should consider suing the party in Saudi Arabia. In some cases, Saudi law requires the suit to be brought in Saudi Arabia. For example, Saudi law prohibits government agencies from disputing a contract in another country. If the other party’s only assets are in Saudi Arabia, the foreign company must ensure that any judgment will be enforced there. Bringing a suit directly in Saudi Arabia provides the best assurance that a favorable judgment will be enforced.
Before suing a Saudi in another country, a foreign company should learn whether Saudi Arabia has a reciprocal enforcement treaty with that country. If a company sues a Saudi in a non-treaty country and attempts to enforce a judgment in Saudi Arabia, the Board of Grievances would review the judgment to make sure that it does not violate Saudi public policy.
The Saudi Judicial System
In resolving disputes in Saudi Arabia, the foreign company might appear before a variety of tribunals. The Saudi judicial system consists of both general courts and specialized tribunals. The courts and tribunals may consist of a combination of judges and non-judges. Decisions may occur quickly or may take several years. In some cases, decisions may be appealed.
In the Saudi judicial system, the Sharia courts are the courts of general jurisdiction. Sharia judges preside over almost any dispute unless Saudi law provides otherwise. Sharia judges apply Islamic Law to decide a case. Sharia courts decide a case usually within a few months. Unlike some other legal systems, such as that of the United States, there is no time limit within which a party must bring a lawsuit. All decisions of Sharia courts may be appealed.
The Board of Grievances has the exclusive power to decide disputes over Saudi Government contracts and may decide some types of commercial disputes. The Board of Grievances often uses outside technical experts to decide cases, which may be helpful for complex cases. Unlike the Sharia and other Saudi courts, the Board of Grievances observes a system of precedent. Decisions of the Board of Grievances may be appealed.
Arbitration
Arbitration presents a feasible alternative to resolving disputes through the Saudi judicial system. A company should be aware of the rules in Saudi Arabia governing arbitration before agreeing to it. A company also should investigate whether the decision of a particular arbitration can be enforced in Saudi Arabia.
Arbitration is an accepted practice for resolving disputes in Saudi Arabia. Arbitration must conform to a detailed set of requirements that govern the selection of arbitrators, the length of the arbitration, and review of the arbitrators’ decision. The chairman of the arbitrators must be expert in Sharia or Saudi commercial law. Unlike some other countries, Saudi Arabia requires a court to approve the arbitration award.
Once the arbitrators have reached a decision, a company must also consider how it will enforce the decision. In the case of arbitrations within Saudi Arabia, the Civil Rights Directorate enforces all arbitration awards. To enforce an arbitration decision, a party may have to petition a court to order the sale of the opposing party’s assets. Saudi Arabia is a party to the New York Convention on Foreign Arbitral Awards. While this generally requires a Saudi court to honor the award of arbitration in another country, there are two conditions under which a court may refuse to enforce the award. Under Royal Decree No. M 11/1994 of January 21, 1994, Saudi Arabia made the reciprocity reservation limiting recognition of awards under the Convention to those rendered in the territory of another contracting state. In addition, the Convention will not be applied retroactively to disputes initiated prior to ratification.
Saudi Arabia has also ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. However, Saudi Arabia entered a reservation to the effect: "the Kingdom reserves the right of not submitting all questions pertaining to oil and to acts of sovereignty to the International Center for Settlement of Investment Disputes, whether by way of conciliation or arbitration." The Kingdom is a member of this associated International Center for Settlement of Investment Disputes (ICSID).
In July 1995, an Agreement on Legal Protection for Guaranteed Foreign Investment between the Multilateral Investment Guarantee Agency and the Kingdom of Saudi Arabia was signed. MIGA has its own Arbitration Rules incorporated into its standard Contracts of Guarantee, based on ICSID rules.
22. I have a new business idea and would like to propose it to relevant companies and/or
people. What steps do I need to take?
You need to visit the Investment Development Center at the Asharqia Chamber. The Investment Development Center will arrange for a meeting where you can present your idea with relevant people in the industries and government.
23. I would like to receive information on the events IDC organizes. What do I need to do?
You need to register with the Investment Development Center. You can do this through our website or by contacting us. Once you have been registered, you will receive regular updates on the events.
24. How can I find information on Investment regulations in Saudi Arabia?
The information can be found by downloading the Foreign Investment Rules and Regulations e-book which is available in our website. You may, also, visit the SAGIA website: www.sagia.gov.sa
25. Does the IDC have publications that can be use to my business?
The list of some publications that you may use is shown below. You will find more by visiting our website.
Publications:
• Why Invest in Eastern Province? (English)
• Foreign Investment Rules and Regulations (English and Arabic)
• Conditions and Schemes for Industrial Investments (Arabic)
26. Do you conduct meetings to promote businesses?
The Investment Development Center conducts promotional meetings or events for businesses with respect to either:
• On a revolutionary product that a company wishes to introduce into the Eastern Province market and to
manufacture it or,
• Hold a technical or educational workshop on a technology or an industrial process. In this case, a company
will be indirectly promoting its products and services.