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Instructions on how overseas investors can invest in Saudi Arabia

Instructions on how overseas investors can invest in Saudi Arabia

Guide to Foreign investment in Saudi Arabia; from the Foreign Investment in Saudi Arabia Franchise

During the recent years, the flows of Foreign Direct Investment (FDI) in Saudi Arabia have experienced a downward trend. As per the UNNCTAD’s 2017 World Invest Report, Saudi Arabia has been ranked to be the third biggest recipient of the FDI after the United Arab Emirates and Turkey within Western Asia.

In 2016, the inflows of Saudi Arabia FDI dropped by a percentage of 8.5 compared to the past year, hence reaching 7.45 billion US dollar, which is the lowest from 2014. Among the factors that lead to a reduction of access in the Saudi policy and credit, are social and political tensions, which began in 2011 courtesy of the local labour force. Nevertheless, a lot of investment has been made by the Saudi government in the national infrastructure with the aim of attracting investment, making Saudi’s FDI to be taken as among the most useful means of economic diversification and create employment for the coming generations.

Recently, the Saudi government proclaimed the introduction of the wholesale and retail sectors to a foreign ownership percentage of 100 and had further introduced a significant program of privatisation. Furthermore, measures have been announced by the Saudi Capital Market Authority, which ease the foreign investment limitations in January 2018 hence the foreign investments would need to contain 500 million US dollar worth of its assets under the management rather than USD 1 billion for it to succeed as a successful investor within the stock market.

How to invest in Saudi Arabia as a foreigner

Foreign investment in Saudi Arabia

After becoming WTO member in 2005, Saudi Arabia’s the climate of the foreign investment improved substantially. From the investor, the strong points of Saudi Arabia involve the big local market with the increased power of spending, the stability of the economy, well regulated-system of banking, and the sound infrastructure. The authorities were comfortable with the FDI because of its capability of transferring the technology, train and employ a national workforce, boost development of the economy, and enhance the raw materials locally.

The controlled inflation of the country and exchange rates that are relatively stable, the foreign capital openness in the upstream gas and extensive programs of privatization are among attracting merits that attract the investors to Saudi Arabia. The vibrant performance of reduced costs of energy and an increased living standard is the foreign investors’ decisive factors.

Rules and Regulations of the Investment

The regulatory supervisor of policy and licensing execution appointed under Saudi’s Foreign Investment Law involves the Saudi General Investment Authority. The policy-driven technical regulation is continuously implemented through the several entities of the government with broad discretion to have an impact on the policy as well as to improve the practices basing on its jurisdiction. However, the general Foreign Investment rule in Saudi Arabia is that the Saudi foreign investment; the investments through the nationals of different states outside GCC, is allowed across the entire sectors of Saudi economy excluding the ones that are on the issued negative list and reviewed periodically and the Supreme Economic Council keep updating them.

Currently, according to the negative list, it prohibits any foreign investment to be done in drilling, exploration and the production of gas and oil, investment of real estate within Medina and Makkah, road transportation, radio and television broadcasting and services of recruitment, and publication. The foreign investment is allowed, though restricted in the local rail transport, banking, insurance, trading, franchise, and telecommunications. Thus, in practice, particular sectors; including learning at every level stay close to any foreign investment even though they are not among the listed areas in the negative list.

How to form a company

According to the Saudi law of companies, it recognizes four kinds of business entities: joint-stock Corporation, limited liability Company, foreign company branch, and the partnership. To become a shareholder, the foreigners should get the Saudi Arabian General Investment Authority (SAGIA) that in practice is granted by this authority of licensing. Consequently, it is recommended that the clients ought to act the alternatives involving:

  1. Register the company branch through this authority of licensing in one of the Gulf Cooperation Council of the Countries, which have been exempted from the requirements of licensing.
  2. Sign an agreement of agency with the local partner.

Also, the applicant foreigners should complete some other steps to be allowed to start their business, including getting the license of the municipality (Baladia) for premises of their office and separately registering with the Labour Ministry, Tax department, General Organization for Social Insurance and the Chamber of Commerce.

How to obtain franchise license

The franchise license approach has now become the most favourable means of carrying out a business in Saudi Arabia. This may provide increased flexibility compared to the commercial agency, though it requires no resources of any joint venture of the branch office. Like it in the commercial agents’ case, any overseas investor ought to go on with the circumspection before entering into, ending or transposing a franchise. The law of commercial agency applies to the franchises. However, for a foreign investor to obtain a lawful franchise, the concept of franchise ought to have been performed by no less than two corporations (which can comprise of the franchisor) in no less than two locations for a year or more.

Why Choose Saudi Arabia for investment

Why invest in Saudi Arabia

The Saudi Arabian Kingdom is currently transforming itself to be among the highly competitive economies among the most rewarding markets for the strategic management. This is advantageous either to the foreign investors or anyone who wants to invest in the country. However, below are the reasons on why to invest in Saudi Arabia:

It all concerns the competitive advantages.

Saudi Arabia has been found to be the most prominent open market economy throughout North Africa and the Middle East and holds a share of 25% of the whole GDP of Arab. The geographic location of the Kingdom allows for easy access to European markets, Africa, and Asia. Its domestic market is expanding continuously (3.5% yearly growth of the population), which is topping up into a small and consuming inhabitant with a strong purchasing power.

The investment environment of the kingdom of Saudi Arabia reflects the liberal traditions, the open private market enterprise regulations and its policies of foreign investment enable full ownership of real estate and projects. If one would like to invest, the kingdom of Saudi Arabia is the place to invest due to its winning records of the economic and political stability, and its infrastructure is modern and of a world-class level.

Even though Saudi Arabia contains a lot of competitive advantages in several strategic sectors both at global and regional levels mostly regarding energy, it has recently gone further than just energy. Saudi majorly concerns putting up a world-class environment of business, which merges both an ease of carrying out a business with a reduced cost. It concerns unconstrained access to financial services and regional markets. Above all, Saudi concerns the vision of the country as well as their shared commitment towards ensuring that the business of an investor thrives.

 

Pros of investing in Saudi Arabia

The kingdom represents the most attractive destination for investment when the prices of energy are rising. Some investors are keen on the long-term economic sustainability of the country despite the country’s dependence on the limited resources such as the crude oil. Also, whether the diversification of the government into different industries is going to work out or not is still being scrutinised. However, the benefits of investing in Saudi Arabia are:

Significant Capital for expenditure – the kingdom regularly operates strong surpluses of the account. Thanks to the country’s significant revenues of the crude oil. Saudi Arabia periodically runs strong account surpluses. Thanks to its considerable incomes of the crude oil. It provides funds for the government to use on development programs of the economy to further stimulate the country’s economy.

Recent Privatizations – the government of Saudi Arabia have gone ahead to privatise particular industries, like telecom and electricity, for it to cut through its market to further the investment externally, particularly within the non-energy markets.

 

Tax system

The Saudi Arabia’s regulations of tax became effective since 30 July 2004, and has come up with some new concepts or/and modified the ongoing practices. Previously, the system of taxation was less organised, and an essential portion of Saudi’s system of taxation had developed over several years through several exercises that have made it attractive for investors.

For an investor, the kingdom of Saudi Arabia is the right place to invest in following the tax concessions that were introduced by the government of Saudi. The Saudi government has established grants of 10 years to six different underdeveloped provinces within the kingdom. The aim of this is to attract additional investment during the beginning of a project. The investors will get the tax credit over the yearly tax that is payable regarding certain incurred costs on the employees of Saudi. Tax credits will also be provided in different regions including northern territory, Al-Jouf, Najran, Jazan, and Ha’il.

The structure of taxation provides some advantages to the different corporations which decide to invest in either the JSCs or the LLCs within Saudi Arabia. Establishment of such companies is free all through the Saudi and only requires filing a single combined return, given that they comprise of the branches of a single legal entity on

Investment in coming years

Franchise investment future in Saudi Arabia

The vision 2030 for Saudi and the National Transformation Program proposes a shifting paradigm from an economy driven by the public sector to the economy private-sector driven economy as the primary job creation and economic growth engine. It has been predicted that there are essential opportunity regions for the industry and US businesses, including in the development of the workforce; geospatial/data/big/IT systems of information, including the renewables as well as the transmission and distribution; tourism and entertainment; and the mining sector.

The Saudi contains the most prominent IT market region of Gulf, valued approximately at $4.6 billion. Additionally, the outlines by the NTP on ICT are $4 billion over the coming five years. Significant development sectors involve the smart grid, control/command of the primary infrastructure using the geospatial systems of IT, and the cybersecurity.

The Saudi contains the most significant markets of IT, valued at about $4.6 billion. Additionally, the outline by NTP has been given in the initiatives of ICT, which is about $4 billion over the coming five years.

Important, ambitious plans of Saudi to upgrade and expand its infrastructure might provide the main opportunities for the firms of U.S. to add up to both the heavy and light rail, Saudi Arabia still intends to grow its intermodal connection between the air services, rail, and bus. Even though the payments on there have been the slow progress of the leading infrastructure projects, the SAG still strives forward with the main projects, involving the existing metro project of 27 billion dollars in Riyadh. The NTP has outlined $1.5 billion on the transport initiatives within the coming four years. Also, it has set an objective of raising the total number of the cities, which benefit from the projects of public transport from 11 up to 16 by 2020.

SAGIA (Saudi Arabia General Investment Authority) guidelines for license

These days, several expatriates visit Saudi Arabia with the aim of putting up their private enterprises. The Indians form important expatriates component who intend to begin their private businesses. The expatriates who need to run a business lawfully within Saudi have to obtain their license from the Saudi Arabia General Investment Authority (SAGIA). However, the following guidelines will assist one to achieve the SAGAIA license within SISGA greatly:

  1. Eligibility —for an expatriate on the permit of work, one cannot be able to get the SIAGA license. One has to confirm to Saudi authorities that their intention of coming to Saudi is to Invest according to the Saudi law.
  2. Preparation of your application — the foreign investors, should prepare the application through document arrangement. The documents involve the Saudi residence visa called Iqama, which is obtained after receiving the Saudi Arabia business Visa.
  3. License Application — Next, one should select the right kind of licenses such as service, trading, industrial, Real Estate, and Agriculture respectively. Then complete the application form of the license and submit it to the SAGIA to be approved. The first license to be issued involving the Temporary Investment License and is accepted for three months. The permanent permit of work is then issued after the finishing the whole registration.
  4. 700 file — one may open  the ‘700 File’ inside the office of labour found within the similar centre of business like the SAGIA office. A 700 file would allow an investor to change the visas for visit of the staff to a lawful Iqama.
  5. Commercial Registration — Afterward, one ought to apply for the Commercial Registration that is done within the similar office within the location of SIAGI.

Current status

Currently, the Saudi government has been able to incentivise the foreign and local investment in the country with the aim of facilitating a shift of economy nation-wide from the dependence on the revenues of oil to other different sources of income. Also, the Saudi government further offer support to the private sector. It has provided a lot of money in capital into the credit bank, to provide long-term loans to the national investors at a reduced rate of interest.

New reforms to ease foreign investments

The Saudi Capital Market Authority (CMA) has announced some of the measures to ease the limitations on any foreign investment within the home stock market. It has brought down the minimum asset’s value under the needed management for any foreign organization to qualify by half as investor within the stock market, and become 500 million dollars but not 1 billion dollars. Also, it has abolished the restrictions of investment through allowing the qualified foreign investors to acquire a big stake, which is up to a percentage of 10 of any issuer’s shares, apart from the 5%.

Conclusion

In brief summary, However, the general Foreign Investment rule in Saudi Arabia is that the Saudi foreign investment; the investments through the nationals of different states outside GCC, is allowed across the entire sectors of Saudi economy excluding the ones that are on the issued negative list and reviewed periodically and the Supreme Economic Council keep updating them. To become a shareholder, the foreigners should get the Saudi Arabian General Investment Authority (SAGIA) that in practice is granted by this authority of licensing.

The kingdom represents the most attractive destination for investment when the prices of energy are rising. Some investors are keen on the long-term economic sustainability of the country given the country’s dependence on the limited resources such as the crude oil. It has been predicted that there are important opportunity regions for the industry and US businesses, including in the development of the workforce; geospatial/data/big/IT systems of information, including the renewables as well as the transmission and distribution; tourism and entertainment; and the mining sector.

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