Investment climate in Saudi Arabia
• There are many reasons for investing in the strategic sectors where Saudi Arabia has great comparative advantages. Saudi Arabia is at the heart of the Middle East/North Africa (MENA) region’s 400 million-strong population. . One of the world’s 20 largest economies, and No.1 in the MENA region, Saudi Arabia ranks 49th out of 189 countries for the overall ‘Ease of Doing Business’, according to the International Finance Corporation/World Bank’s ‘Doing Business’ report in 2015.
• Saudi Arabia is the largest free market in the Middle East, having 38% of the total Arab gross domestic product (GDP), the largest oil reserves worldwide (18%) and lowest energy prices for investment projects. Thus, Saudi Arabia is an Ideal destination for projects that depend on energy consumption. In addition, Saudi Arabia has a number of promising mining natural resources and a good location makes it and easy access for the European, Asian and African markets. Moreover, Saudi market has high purchasing power and continuous expansion. The Kingdom is one of the fastest-growing countries worldwide, with per capita income forecast to rise from $25,000 in 2012 to $33,500 by 2020.
• The Saudi Riyal is one of the world’s most stable currencies, with no critical changes in its exchange rates during the last three decades. Saudi Arabia permits transferring of capital and profit abroad. Moreover, Saudi Arabia has low inflation rates and pursues to conclude mutual agreements with a number of countries in regards of promoting and protecting investment as well as preventing double taxation.
Regulatory incentives
Saudi Arabia constantly improves investment environment, especially the logistic regulations in an effort to support foreign investment. In 2000, the Saudi government announced a new Foreign Investment Law, introducing major regulatory incentives including:
• The establishment of the Saudi Arabian General Investment Authority (SAGIA), to be the responsible authority for issuing investment licences to foreign investors and coordinating with other related governmental bodies for the approval.
• Accelerated investment application, business registration and set-up process, within thirty (30) days of submission to SAGIA.
• Foreign investors will benefit from incentives and guarantees that local and national investors receive according to laws and regulations.
• Limited Liability Companies are not required to Minimum Capital.
• Owning Direct Property for the licensed company including residence and employees allocations.
• Permissions of transferring capital and profit abroad.
• Flexibility of transferring/allocation of companies shares between shareholders according to regulations.
• The licensed company is sponsoring the investor and its employees (non-Saudis).
• The availability and eligibility to apply for loans from the Saudi Industrial Development Fund.
Financial incentives
• Benefit from corporative/collateral and massive agreements regarding taxation and investment with other countries.
• No personal income taxes.
• Taxes are 20% from total profits on companies.
• The ability to transfer losses for future years in regard to taxes.
• Foreign investors have access to generous regional and international financial programs and incubators, including:
o Saudi Industrial Development Fund
o Arab Fund for Economic and Social Development (AFESD): Participates in financing economic and social development projects in Arab countries.
o Arab Monetary Fund: Promotes the development of Arab financial markets and trade among member states; advises member states on investment of resources.
o Arab Trade Financing Program: Provides medium and long-term loans to individuals and organizations for private and commercial trade.
o Inter-Arab Investment Guarantee Corporation: Provides insurance coverage for inter-Arab investments and export credits against commercial and non-commercial risks.
o Islamic Development Bank: Participates in equity capital and grants loans for productive projects and enterprises. It accepts deposits to mobilize financial resources through Shari'a compatible avenues.
Other financial incentives the encourage investments in the Kingdom include:
o The Human Resources Development Fund to support activities related to qualifying, training and recruitment of Saudi labor.
o Competitive industrial utility rates for water, power and land.
o Large research and development endowments at King Abdullah University for Science and Technology (KAUST) and King Abdul Aziz City of Science and Technology (KACST).
Tax incentives (Specified Regions Only)
Saudi government offered tax incentives for training and recruitment of Saudi labor in some regions, including:
1. Ha’il
2. Jazan
3. Najran
4. Al-Baha
5. Al-Jouf
6. Northern Borders
The tax incentives include the following:
Tax Reduction equal to 50% from annual expenses for recruiting and training of Saudis, tax reduction equal to 50% from Saudis annual salaries, plus tax reduction for industrial projects in these areas not exceeding 15% of non-Saudis’ share in the capital.
Excellent
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