Legal Framework for Investments in Saudi Arabia
Entering The Saudi Market
Alaa Yamani
Frankfurt am Main, 19 January 2016
©2016 Alaa Yamani-YJB
Entering The Saudi Market
There are two approaches for non-Saudi entities to invest in the Saudi
Arabia:

Direct approach.

Indirect approach.
©2016 Alaa Yamani-YJB
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Entering The Saudi Market

Direct approach:

A foreign company can set up a business in Saudi Arabia by obtaining a
license from the Saudi Arabian General Investment Authority (SAGIA).

Foreign companies can own up to 100% of their business.
©2016 Alaa Yamani-YJB
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Entering The Saudi Market

Direct approach:
Most activities are allowed (with some exceptions):

Industrial.

Services & contracting.

Trading.

Real Estate.

Agriculture.
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Entering The Saudi Market

Direct approach:
Some activities are prohibited for foreign investments, e.g.:
 Industrial Sector:
Oil exploration / Manufacturing of military equipment.
 Services Sector:
Security services/ Recruitment services/ Real-estate brokerage/ physical therapy.
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Entering The Saudi Market

Direct approach:

Minimum Capital Requirements:
o
Service: No minimum capital.
o
Industrial: SR. 1M.
o
Trading: SR. 20M.
o
Real Estate: Min. project value SR. 30M.
o
Agriculture: SR. 25M.
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Entering The Saudi Market

Direct approach:
Foreign investments in Saudi Arabia can be in any of the following forms:

Limited Liability / Joint Stock Companies.

A branch office.

Scientific and Technical Office.
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Entering The Saudi Market

Direct approach:

Limited Liability Companies:
o
The number of shareholders shall not exceed (50).
o
L.L.C may not conduct insurance, banking or saving activity.
o
No minimum capital. The capital should be adequate for achieving the company’
purposes.
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Entering The Saudi Market

Direct approach:

Joint Stock Companies:
o
The capital of a joint-stock company shall not be less than SR 500K.
o
Joint Stock Companies shall be formed only by a resolution issued by the
Minister of Commerce
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Entering The Saudi Market

Direct approach:

Branch office:
o
A foreign company may establish a branch in Saudi Arabia.
o
Similar procedure as forming new company.
o
The mother company could be sued for claims arising out of the activity of
its Saudi branch .
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Entering The Saudi Market

Direct approach:

Scientific and Technical Office:
Offered to foreign companies that desire to provide direct scientific and technical
services to their Saudi agents, distributors and consumers of their products.
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Entering The Saudi Market

Direct approach:

Licenses for Contracting Activity:
1) Temporary certificate to submit proposals for government projects:
A foreign company may obtain a temporary certificate to bid for government
projects.
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Entering The Saudi Market

Direct approach:

Licenses for Contracting Activity:
2)
Temporary licenses for the performance of government/ semigovernment contracts:
A government or semi-government contract winners can apply for a temporary
license to execute one project only.
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Entering The Saudi Market

Direct approach:

Licenses for Contracting Activity:
3)
Temporary contracting licenses for a period of (3) years:
Firms that wish to explore Saudi markets may apply for a time-limited temporary
contracting license, renewable under specific criteria.
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Entering The Saudi Market

Direct approach:
Investment Requirements:

Shareholder’s resolution to invest in the Kingdom.

Copy of the Articles of Association & C.R.

Company’s profile not exceeding five (5) pages.

Undertaking to deposit full capital in an approved bank in Saudi Arabia.
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Entering The Saudi Market

Direct approach:
Investment Requirements:

A proof of financial capability.

Detailed action plan identifying the project’s capability to achieve
investment objectives, and to enhance the Kingdom’s Revenue.
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Entering The Saudi Market
Indirect approach
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Entering The Saudi Market

Indirect approach:
Foreign companies can access the Saudi market via a Saudi entity, through
any of the following methods:

Commercial Agency.

Distributorship.

Franchise.
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Entering The Saudi Market

Indirect approach:
Benefits:

Access to Saudi market with minimal or no cost.

No restrictions on activities, as Saudi entities may conduct all activities.

No lengthy procedures.

The foreign company is protected from liability that may arise out of its
product or service.
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Entering The Saudi Market
Import and Export Regulations
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Entering The Saudi Market
Import and Export Regulations

A custom duty of 5% is imposed on most products from all countries, with
some country-exceptions.

Most livestock may be imported duty-free.

There are no duties on exports.
©2016 Alaa Yamani-YJB
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Entering The Saudi Market
Taxation
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Entering The Saudi Market
Taxation

Corporate Income Tax:
Profits of foreign investors are subject to income tax of 20%, for Most types of
business, with some exceptions.
©2016 Alaa Yamani-YJB
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Entering The Saudi Market
Taxation

Withholding Tax:
All payments from a resident business to a non-resident generated from a source
in Saudi Arabia is subject to withholding tax at a rate of 5-20%.
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Entering The Saudi Market
Disputes Resolution
&
Enforcement of Foreign Judgments and
Arbitral Awards
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Entering The Saudi Market
 Disputes Resolution

All business disputes are heard by commercial courts, which shall apply
Islamic Shari’ah as well as various codified commercial laws.

Opponents may choose to settle their disputes through arbitration.

Arbitration procedures should be consistent with applicable laws.

Arbitration awards should not contradict Islamic Shari’ah, nor applicable
laws.
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Entering The Saudi Market
Enforcement of Foreign Judgments and Arbitral Awards
 Foreign judgments and arbitral awards are enforceable in Saudi Arabia if
(among other things):
 Reciprocal treatment exists;
 The foreign judgments is final; and
 The foreign judgment contains nothing that violates the public policy of Saudi
Arabia.
©2016 Alaa Yamani-YJB
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Entering The Saudi Market
Thank you very much
©2016 Alaa Yamani-YJB
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Contact
GERMELA
Yamani, Jamjoom & Baroom Law Firm
Dipl. Pol. Alexander M. Haghani
Alaa Yamani
Managing Partner
Business Development
Executive
Lehmweg 17
Bughdadiya Dist, Hail St, Al-Amal plaza building
office #101
20251 Hamburg
P.O. Box 2720 Jeddah 21461
Germany
Jeddah
Saudi Arabia
Phone: +49 (40) 414 252 60
Phone: +966 12 6143614
alexander.haghani@germela.co
m
ayamani@yib-law.com
www.germela.com
www.yjb-law.com