Foreign Investment Law in Saudi Arabia

The economic diversification plan led to a surge in foreign investments in the Kingdom of Saudi Arabia (KSA). This has inadvertently led to an increase in business setup in Saudi Arabia and the introduction of foreign investment law.

Setting clear rules and regulations for foreign investors is essential for creating a successful business environment. Having transparency ensures that investors have a complete understanding of the legal environment. Read on to have a better understanding of foreign investment laws in Saudi Arabia.

What is the Foreign Investment Law in Saudi Arabia?

The Saudi Arabia Foreign Investment Law, also known as the Foreign Direct Investment (FDI) law, was introduced in 2000. This law allows foreign entrepreneurs to invest in the country while protecting national interests. Any foreign legal entity or individual establishing their company in Saudi Arabia by following the laid down regulations contributes towards foreign investment.

Details of Foreign Investment Law in Saudi Arabia

The Saudi Foreign Investment Law (Foreign Investment Act and Executive Rules, 2000) has several provisions that provide guidelines for foreign investments. Some of the major provisions are listed below:
Article 1 - This article mentions the definitions of specific terms used in the Act and Rules. Those words must have the meanings assigned to them as per Article 1 unless it has a different context.
Article 2 - The General Investment Authority grants permanent or temporary licenses for foreign capital investment in Saudi Arabia, as per the provisions of the law. It also mentions that foreign investors can apply for multiple licenses based on their business activity.

The authority must take action on the investment application within 30 days of submission. The application is considered submitted only if all the required documents are attached. If no errors are found, the authority will issue the license after the completion of the mentioned time period. However, if the application is rejected, the reason must be justified, with the applicant having the right to appeal.

Article 3 - The Supreme Economic Council has the power to issue a list of activities excluded from foreign investment. The list is updated from time to time as per the changing requirements of the market.

Article 5 - As per the laws, firms completely owned by foreign investors or those owned by Saudi nationals and foreign investors can make licensed foreign investments.

Article 6 - A licensed foreign investor can enjoy the same benefits, incentives, and guarantees as a Saudi investor.

Article 7 - A foreign investor is allowed to repatriate the profits earned by the sale of equity, liquidation surplus, or profit generated by the firm through its business activity or activities.

Article 8 - The licensed foreign firm can acquire the required real estate or property. It can be used for conducting operations of the licensed activity or for housing its staff as per the regulations for real estate ownership by non-Saudis. The foreign investor and non-Saudi staff must be sponsored by the licensed firm.

Article 10 - The General Investment Authority is bound to provide information, clarifications and statistics to all interested investors.

Article 11 - As per the guidelines and the law, the investments of foreign investors cannot be completely or partially confiscated without a court judgement. According to the laws, investments should not be snatched from investors without fair compensation. However, if it is done, the only ground should be in the public interest.

Article 12 - The law provides the General Investment Authority with the power to issue a notice to foreign investors in case of any violation of the law. It must provide a specific time period to rectify such violations.
In case the foreign investor does not act as per the notice of the authority, it can impose penalties such as withholding benefits or incentives, revoking the license or imposing a fine of up to SAR 500,000. The foreign investor may appeal against the penalties before the Board of Grievances.

Article 15 - The foreign investor has to comply with all the laws and regulations of Saudi Arabia Additionally, they must also adhere to the international agreements of which Saudi Arabia is a party. The tax laws in the country are applicable to all foreign investments licensed under this law.

Disputes between foreign investors and the Saudi government or Saudi partners must be settled mutually and amicably. If there is no amicable settlement, such disputes are settled as per the applicable laws.

Note - To get a detailed understanding, check out the Foreign Investment Law in Saudi Arabia

It is important to understand the details of foreign investment law in Saudi Arabia in order to avoid any legal complications. Compliance with local regulations can help in creating a strong brand image and foster better business relationships.

For a better understanding of Saudi foreign investment law, contact us. Commitbiz business experts can help you navigate the legal processes and ensure smooth business registration in Saudi Arabia.