The Kingdom of Saudi Arabia has adopted an ambitious vision called Vision 2030, aimed at confronting the external challenges and pressures that the Saudi economy has experienced in recent years. Among the most significant of these challenges are the weakness in economic diversification, the competitiveness of the local industry, labor market imbalances, and unemployment. Therefore, there is a necessity to find new sources of income to maintain sustainable growth rates in the coming years.
When the Kingdom of Saudi Arabia launched "Vision 2030," it prioritized both domestic and foreign investments. Investment became not only a cornerstone that supports the vision but also an effective tool in the process of economic transformation, and diversification of national income sources, primarily relying on attracting more foreign investments, encouraging domestic investments, and enhancing partnerships between the public and private sectors.
What is the concept of foreign investment?
Foreign investment can generally be defined as the capital used in the production or provision of services or goods. It can be a fixed investment, such as property ownership, or a variable investment, such as preferred stocks and bonds. Investment is "a portion of savings employed in something in the hope of profit."
Foreign Investment System in the Kingdom of Saudi Arabia and its Key Economic Advantages-
One of the objectives of investment includes:
1. Protection of capital
2. Wealth development and profit realization
3. Achieving the best financial returns
Foreign Investment System in the Kingdom of Saudi Arabia:
Key provisions include:
Licensing any foreign capital investment in the Kingdom, either permanently or temporarily.
Ownership of necessary real estate for licensed activities.
Prohibition of expropriation of investments in whole or in part except by judicial decision or expropriation for public interest and fair compensation.
Freedom to transfer shares among partners and others.
Guarantee for foreign investors and their non-Saudi employees provided by the licensed establishment.
What are the incentives for foreign investment in the Kingdom?
(Positive aspects of the investment environment)
The political and security stability, economic openness, legislative, financial, and tax incentives for foreign investors, in addition to the increase in purchasing power and the availability of economic, human, and demographic resources supporting production and service provision.
Availability of infrastructure, most of which is characterized by development and modernity, and exchange rate stability.
To achieve the objectives of Vision 2030, the Kingdom has launched twelve executive programs, including programs by the Public Investment Fund to highlight the national goal in internal and external investments and diversify sources of construction and development, as well as establish strong economic partnerships that deepen the Kingdom's impact and role regionally and internationally.
Vision 2030 aims to create an ambitious and attractive environment for foreign investments by increasing the percentage of foreign direct investments from 3.8% of GDP to the global average of 5.7%. This will be achieved by generating attractive and lucrative investment opportunities with economic feasibility. One of the significant investment opportunities initiated by the Saudi government in 2018 is the Qiddiya entertainment project, considered a promising project in the Riyadh region aimed at attracting more foreign investments into the Kingdom.
Basic Procedures for Initiating an Investment Project in the Kingdom:
There are three main essential elements upon which any foreign investment project relies:
1. Licensing and Procedures for Foreign Investment:
To commence business activities in the Kingdom, the prospective investor needs to obtain a foreign investor license.
The Saudi Arabian General Investment Authority (SAGIA) is responsible for improving the investment environment and providing all necessary services to investors.
Types of investment licenses vary, each with its specific requirements, such as minimum accepted capital and maximum foreign capital limit.
Prospective investors can apply for a license online through the SAGIA portal and also benefit from the instant licensing service provided by SAGIA.
These procedures ensure that foreign investors can smoothly initiate their investment projects in the Kingdom of Saudi Arabia while complying with the relevant regulations and requirements set forth by the Saudi Arabian General Investment Authority.
The financial system Related to Foreign Investment includes four main elements:
Corporate Income Tax: This applies to the foreign ownership of companies based in the Kingdom of Saudi Arabia, with a statutory rate of 20%, which is among the lowest levels among the G20 countries.
Zakat Tax: Applied to the company's headquarters in Saudi Arabia at a rate of 2.5% of the Zakat base.
Value Added Tax (VAT) Mechanism
Procedures for Obtaining Investment Licenses:
Foreign investors are allowed to obtain multiple licenses for specific activities or various other activities approved by the Saudi Arabian General Investment Authority (SAGIA).
To obtain an agricultural, industrial, or service license, the designated form must be completed and signed by the applicant or their authorized delegate.
Upon receiving all the required documents related to the license, SAGIA will issue the project's license decision within a maximum period of 30 days.
A remote license renewal service program has been introduced.
These elements collectively form the financial framework surrounding foreign investment in the Kingdom of Saudi Arabia, ensuring clarity and compliance with regulations for investors.
Rights of Foreign Investors in Investment in the Kingdom of Saudi Arabia:
1- Rights of Applicants for Issuing New Investment Licenses:
- Right to respond to the new license application.
- Right to have the refusal of the new license issuance justified.
- Right to appeal the rejection decision to the Board of Grievances.
2- Rights of Foreign Investors During the Validity of the License:
- Right to enjoy all benefits, incentives, and guarantees granted to national projects according to the regulations and instructions under the Foreign Investment Law.
- Right to renew the license upon completion of the required documents.
- Right to be granted a suitable period to rectify any detected violations.
- Right to own real estate following the provisions of the non-Saudi ownership of real estate law.
- Right to have investments not seized except by a judicial ruling and not expropriated except for public interest and against compensation according to the Foreign Investment Law.
- Right to have non-Saudi employees guaranteed by the licensed establishment.
- Right to have the investor's guarantee on the licensed establishment if the conditions mentioned in the Investor Services and Consultations Guide issued by the Saudi Arabian General Investment Authority are met.
- Right to transfer their share of the sale proceeds, surplus from liquidation, or profits earned by the establishment abroad or dispose of them through any other legitimate means. The investor also has the right to transfer necessary amounts to fulfill any contractual obligations specific to the project.
Under the ambitious Vision 2030, the Kingdom is ready to rank among the top ten most competitive countries in the world, making it one of the most attractive markets for strategic foreign investment and qualitative investment aimed at transferring technology, knowledge, and managerial and professional expertise. This prepares the Saudi economy for a new transitional phase, characterized by a greater role for the private sector in development processes and the relinquishment by the state of the management and ownership of many productive assets.
Establishing your company in Saudi Arabia offers the following advantages:
- 100% foreign ownership
- Commercial license in Saudi Arabia
- Virtual office solutions
- Residency for a manager
- Tax registration
Contact us to learn more.
Email: info@ilsconsultancy.ae
+971555611565
+971559897409
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