Saudi Arabia, the biggest economy in the Gulf region, has taken many steps to become a regional hub for foreign investment and attract more companies to the private sector, aligned with its Vision 2030 goal of a more diversified economy.
Saudi business solutions provider Proven recently published a consolidated report on foreign investment in Saudi Arabia listing the legal entities foreign investors can operate in the Kingdom:
- A limited liability company (LLC) is a private equity formed between two or more partners (maximum of 50) or shareholders who are liable for the company’s debts respective of their contributed capital.
- A single member limited liability company (SMLLC) is an LLC established by one person. This person has complete authority and can assume the position of director, board of directors and general shareholders’ assembly. The owner is liable to the amount of capital placed in the company.
- Foreign companies can set up a branch office in Saudi Arabia where the parent company undertakes full liability of the office’s actions.
- A joint stock company (JSC) is a company whose capital is divided into negotiable shares. A JSC will have a name indicating its purpose and is managed by a board of directors. The JSC’s memorandum of association limits its members to a minimum of three and a maximum of eleven.
The Saudi Arabia General Investment Authority (SAGIA) estimates a 70 per cent increase in new foreign investor licences in Q1 2019 over Q1 2018. The highest number of investments per sector are in manufacturing, IT, construction and professional science and technology.
“There are too many programmes and initiatives as part of Vision 2030 to make Saudi an investors’ hub. The ones such as the National Transformation Programme and Industrial Logistics Programme are changing the infrastructure of the Kingdom and attracting investors,” Zaid AL Mashari, CEO of Proven, told Zawya.
The National Transformation Programme is an action plan by the Saudi government to diminish the country's economic dependence on oil. This five-year plan has three strategic objectives: public sector and fiscal reforms, economic diversification and enhancing the business environment, and social reforms.
“Saudi Arabia’s crown prince Mohammed Bin Salman travelled to several countries, including the US, India, China and signed a number of MoUs for investments in the Kingdom. All this will have an impact in increasing the number of investors to the Kingdom,” Mashari said.
The report from Proven highlights some of the important licences available for foreign companies considering investments here.
- Service licences are available for a range of services, including management consulting, information technology, tourism, training, health, insurance and reinsurance, education, advertising and media, logistic services, organizing exhibitions, catering and food services, financial services and aviation and handling services.
Service licences are divided into two categories: specialized activities, which require approval by other government agencies for services such as health, insurance and transportation, and nonspecialized activities, where no such approval is required.
- Industrial licences are available for heavy and light industries and transformative industries.
- Licences for a scientific and technical office are meant for foreign companies that have a Saudi agent distributing the company’s products in the kingdom and wish to open an office to provide scientific and technical services to agents, distributors and consumers of those products.
- A temporary certificate to submit a proposal to government projects may be requested by businesses that need to bid for government projects by submitting an application to SAGIA.
- A real-estate licence is for foreign companies dealing in property where the total cost of the project in question is not less than SAR 30 million in terms of land and construction and the investment established outside the borders of the cities of Mecca and Medina.
- A trading licence is provided to foreign entities that seek to undertake wholesale and retail trade in Saudi Arabia.
- A licence for public transport is required by international companies that wish to provide public land transport services (such as buses or metros) within the kingdom.
- A consulting licence for engineering offices is for foreign companies that wish to provide engineering consultation services inside the Kingdom with a 100% possession.
- An entrepreneur licence is provided to those who wish to establish pilot projects accredited by Saudi universities or business incubators.
- An immediate licence is for foreign companies that want to open a headquarters in Saudi Arabia to engage in investment activity immediately and provide documents that meet the standards required for the activity.
- A licence for agents of recruitment and hiring of domestic labour services is for foreign companies engaged in domestic labour placement services and temporary employment agency activities for home services in the Kingdom.
- Licencing of university colleges and constant universities are available to foreign companies that wish to conduct such educational activities in the Kingdom.
Our Standards: The Thomson Reuters Trust Principles
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
(Writing by Seban Scaria)
© ZAWYA 2019