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How to Set up a Business in the Kingdom of Saudi Arabia
  • Article, Saudi Arabia

How to Set up a Business in the Kingdom of Saudi Arabia?

Essentially an oil-based economy, Saudi Arabia enjoys a great global reputation as a business-friendly nation. The country is a member of several international institutions including WTO, G20, GCC, OPEC etc. and offers huge investment opportunities. Construction, real estate, healthcare and life sciences, education, energy, chemicals, IT and Industrial Manufacturing are the most sought after non-oil business sectors for company registration in Saudi Arabia.

Saudi Arabia recently made significant improvement in all its global business indices rankings and as per the latest “ease of doing business” report of the World Bank advanced 30 places to 62nd from its 92nd ranking in 2018.

The World Bank reported the Kingdom as one of the greatest reformers in economic and social aspects propelled by the Saudi Vision 2030 which introduced many regulatory and policy reforms to simplify doing business in Saudi Arabia and attract foreign investment in the country.

The Kingdom has been a staunch advocate of technological innovation to bring improvement in many diverse areas such as education, health care and desalination and power distribution. King Abdulaziz City for Science and Technology (KACST)) as well as the already planned USD 500 billion high-tech mega-city will also help in fuelling the country’s economic growth.

What are the business structures in Saudi Arabia?

The following business structures are available in Saudi Arabia as per the company regulations

  • Branches of a foreign company most commonly incorporated by foreign investors.
  • Joint Stock Company.
  • Joint ventures.
  • Representative Office (Technical and Scientific Office, TSO).
  • Limited Liability Companies also preferred by most foreign investors.
  • Limited partnership.
  • General partnership.

What are the procedures to set up a business in Saudi Arabia?

To open a company branch office in Saudi Arabia, or to set up an LLC, the waiting time is usually three to six months before you get the commercial registration from the Saudi Arabia Ministry of Commerce and Industry. The steps involved are as under

  • Obtaining an investment license from the Saudi Arabian General Investment Authority (SAGIA).
  • Notarizing the articles of association.
  • Opening a local bank account and making the initial deposit.
  • Registering with the Customs department.
  • Registering with the Ministry of Labor.
  • Register with the Mudad Business Portal to facilitate admin and finance procedures for your business entity.
  • Reserving the company name and submitting AOA, articles of association and other mandatory documents.
  • Making payment for company registration.
  • Registering with the General Organization for Social Insurance (GOSI).
  • Registering with the Chamber of Commerce.
  • Obtaining a municipality license.
  • Registering with the electronic Qiwa HR portal.

All documents needed for submission must be translated into the Arabic language for filing with the regulatory bodies.

Who can set up a business in Saudi Arabia?

All non-Saudi nationals as per the foreign investment act are allowed to make investments in the Kingdom and can become stakeholders in minority, majority or 100 per cent foreign-owned ventures. However, there are sectors where foreign investment is not allowed as per the “negative list” issued by the government.

The sectors not included on the negative list should be treated as open to foreign investments. Saudi foreign investment act allows equal opportunities to non-Saudi firms. Expropriation of foreign-owned assets is only permitted as an exception under Saudi laws. The Kingdom permits buying property and allows businesses to sponsor their employees.

Why are foreigners preferring Saudi Arabia as a future business destination?

Specifically designed to attract foreign investment, Saudi Arabia extends the following incentives to the foreign investors

  • Export credit financing.
  • Subsidized power, water and natural gas.
  • Financial incentives for R&D projects that enable economic growth.
  • Loan facilities for industrial investments both in public and private sectors.
  • For foreign investors investing in some underdeveloped provinces including Jazan, Najran, Al-Baha, Al-Jouf, Ha’il and Northern territory, the government allows 10-year tax concessions.
  • Customs duty waiver on some specific materials, machinery and equipment.
  • Employment-related support by Human Resources Development Fund (HRDF).
  • No major restrictions by the Saudi Arabia Monetary Authority (SAMA) on the inward or outward movement of funds by companies.
  • An LLC can be incorporated by one shareholder instead of a minimum of two mandated earlier.
  • Reduction in minimum share capital requirement for JSCs to SR500,000 from SR2,000,000).
  • Reduction in the minimum number of shareholders for JSCs to two from five.
  • Reduction in yearly statutory reserve requirements for LLC shareholders to 30 per cent from 50 per cent earlier.

How is the tax structure in Saudi Arabia?

A resident corporation is taxed on income generated in Saudi Arabia and considered resident when registered as per the regulations for companies in Saudi Arabia or its head office in the country.

Any non-resident carrying out income generation activities through a permanent entity is taxed on income accrued to it.

Only non-Saudi investors are liable for income tax and GCC nationals are treated as Saudi citizens for tax purposes. Non-Saudi taxpayer’s share of a resident company or a Non-resident’s income from a permanent establishment in Saudi Arabia attracts 20 per cent corporate income tax and Zakat at a flat 2.5 per cent rate.

A company in Saudi Arabia having both Saudi and foreign shareholders is liable for corporate income tax based on the portion of taxable income from the non-Saudi operation, while only religious tax Zakat is applied to Saudi business activities. Saudi Arabia doesn’t provide any foreign tax relief to foreign companies.

Withholding tax is levied while distributing dividends to the non-residents including non-resident GCC shareholders and at a 5 per cent rate.

Capital gains are subject to Zakat and the government doesn’t levy any tax on capital duty, stamp duty and real estate duty.

There is no withholding tax on payments made to non-residents for the import of goods.

Conclusion

The Ministry of Investment of Saudi Arabia (MISA) has several branches in Riyadh, Jeddah, Dammam, Medina, and Jubail to serve the investors and address their issues.

Many industrial sites are built to attract foreign investors in Riyadh, Jeddah, Dammam, Qaseem, Al-Ahsa and Mecca offering subsidiary companies tax exemptions for 5 years with subsidized electricity, water, fuel etc.

Due to the covid pandemic, the Saudi government deferred income tax and zakat filing for 3 including the postponement of filing of withholding tax returns for the months. of March, April and May for 3 months. The government is also planning additional tax and financial incentives to mitigate the adverse effects of the pandemic.

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Saudi Arabia Surpasses SR 2 Trillion FDI Amidst Covid Pandemic
  • Newsletter, Saudi Arabia

Saudi Arabia Surpasses SR 2 Trillion FDI Amidst Covid Pandemic

Saudi Central Bank (SAMA) data reveals that 2020 witnessed the highest inflow of foreign investments in the Kingdom of Saudi Arabia (KSA) surpassing SR 2 trillion (USD 0.53 trillion) and rising 9 per cent YOY despite global economic turmoil caused by covid 19 pandemics. A USD 46.21 billion as new investment from overseas was generated by the KSA that promoted new foreign company formation in Saudi Arabia.

The whooping FDI was termed as significant by Fadhel Al- Buainain, a member of Shoura Council and positioned Saudi Arabia as one of the most attractive destinations for foreign investors because of diversified government investment programs and supportive legislative processes of the country’s investment ecosystem.

Al-Buainain also a director of Saudi Financial Association highlighted that SR173.3 billion investment at a time of global travel restrictions reinforced the fact that KSA effectively handled the challenges caused by the pandemic and successfully addressed the issue of the country’s reserve.

“Certainly, foreign capital is looking for opportunities in emerging markets . . . especially the Saudi market, which provides investment opportunities, safety and rewarding returns, in addition to important partnerships in major global pioneering projects,” Al-Buainain noted.

Partnerships were led by the sovereign wealth fund and the Public Investment Fund and opportunities were presented as a part of the Vision 2030 program, he added.

The increased FDI inflow was attributed to “the significant improvement in the investment environment in the Kingdom” and the up gradation of investment laws, remarked Talat Zaki Hafiz, an economist and financial analyst by profession. He also highlighted big government projects e.g. The Line and renewable energy projects as additional attractions for global investors.

Hafiz said, “The announcement of the SR27 trillions ($7 trillion) that will be spent by the government over the coming 10 years has attracted the attention of foreign investors.”

He also added, “I believe the decision of the government to diversify its economy away from oil has created huge investment opportunities to foreign and local investors.”

KSA issued 466 investment licenses to foreign investors for doing business in Saudi Arabia in the fourth quarter of 2020, a 60 per cent increase compared to the previous year and December adding 189 investment licenses. The overall FDI rose by more than 20 per cent during 2020 and increased 80 per cent to touch USD 1.9 billion with the economy growing to pre-pandemic levels. KSA also made remarkable improvement in the World Bank’s ‘ease of doing business ‘ index, advancing 30 points in the global ranking.

Issam Abousleiman, World Bank regional director for GCC said, “Saudi Arabia’s impressive reforms in doing business this year show its commitment to fulfilling the main pillar of its National Vision 2030 — a thriving economy.”

“Easing the business climate for local entrepreneurs to thrive as well as foreign investors to work in the Kingdom shows a forward path to creating more jobs for Saudi youth and women, and creating sustainable, inclusive growth,” he highlighted.

New businesses and startups witnessed the maximum surge with the cost of starting a new business dipping to an all-time low of 5.4 per cent of per capita income compared to 16.7 per cent in other parts of the MENA region.

“One of the most important factors that attracted foreign investors is the issuance of new legislation and amendments in some existing legislation,” noted Ayed Alblaihshi, a municipal investment specialist.

Access to the online construction permit, easy availability of electricity, enhanced access to credit, easy export and import laws including more transparent insolvency rules are some of the reforms that aided the country in achieving this feat, the World Bank reported.

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Saudi Arabia is All Set to Introduce E-Invoicing
  • Newsletter, Saudi Arabia

Saudi Arabia is All Set to Introduce E-Invoicing

A draft resolution detailing the technical and functional implementation guidelines of E-invoicing has been released on 18th March 2021 by Saudi Arabia’s General Authority of Zakat and Tax (GAZT) as an addendum of earlier released regulations published during December last year.

The E-invoicing implementation has been planned in two phases, the first one going live on 4th December 2021 followed by the second phase that would go live on 1st June 2022 GAZT has also announced that all businesses may not be needed to comply with the requirements by 1st June 2022 and the details will be published as a separate resolution afterward.

Unlike a handwritten or scanned invoice, an electronic invoice is generated, stored, and amended in a structured electronic format through an electronic solution that includes all the requirements of a tax invoice. Credit and Debit Notes issued in an Electronic format, as a result of amendments conducted in the Electronic Invoice are called electronic notes and don’t include photocopied or scanned paper notes.

E-invoicing will be used for VAT purposes and will apply to all taxable persons excepting the non-resident taxable persons and any other party issuing tax invoices on behalf of a supplier subject to VAT. Exempt supplies and imports of goods and services subject to Reverse Charge Mechanism (RCM) are excluded from E-invoicing requirements

The contents of an electronic invoice will have all Terms, requirements, and conditions applicable to tax invoices as per Article (53) of the VAT Implementing Regulation. All applicable provisions of tax invoices will apply to Electronic Invoices, including the rules of storage of tax invoices stipulated in the VAT legislation, and specifically, Article (66) of the VAT Implementing Regulation.

For simplified e-invoices and notes, a Quick Response (QR) code of a Base64 format with up to 500 characters must be generated and printed on simplified e-invoices and E-notes. Additionally, controls/mechanisms should be implemented to avoid tampering of the e-invoices.

The e-invoice and E-notes must be issued in XML or PDF format and shall generate a universally unique identifier. For simplified e-invoices and E-notes, businesses will need a cryptographic stamp to be included on the electronic invoices or notes.

The details regarding implementation timelines, targeted groups, and specifications for generation, storage and integration including approved external provider details for E-invoice Generation Solutions will be issued by the GAZT at a later date.

The implementation of Electronic Invoicing will have two phases and will include two specifications

  • Phase one is for the generation and keeping of tax invoices and electronic notes in a structured electronic format issued through an electronic solution that combines all the requirements of tax invoices.
  • Phase two is the Integration of the electronic solution of taxable persons used for generating electronic invoices and notes with the system of GAZT for data sharing.


The Kingdom of Saudi Arabia has planned to introduce e-invoicing as a step towards global best practices aiming for increased compliance with tax obligations, better consumer protection, and fair business competition.

As E- invoicing is made mandatory, businesses that need to issue E-invoices and/or E-notes as per E-invoicing Regulations must make themselves aware of necessary requirements.

All businesses must carry out an initial gap analysis for evaluating if their existing system and technical specifications of E-invoicing complies with the draft resolution requirements.

GAZT also welcomed public comments that can be shared till 17 April 2021 allowing taxpayers and E-invoicing service providers including advisors and other interested parties to comment on the draft resolution.

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Qiddiya Investment Company (QIC) And The General Authority of Small and Medium Enterprises (Monsha’at) Sign Two Memoranda of Understanding to Support Local SMEs in Saudi Arabia
  • Newsletter, Saudi Arabia

Qiddiya Investment Company (QIC) And The General Authority of Small and Medium Enterprises (Monsha’at) Sign Two Memoranda of Understanding to Support Local SMEs in Saudi Arabia

Qiddiya Investment Company (QIC) and the General Authority for Small and Medium Enterprises (Monshaat) in the Kingdom of Saudi Arabia came into an agreement and signed two memoranda of understanding (MoUs).

The agreements are intended to enhance bilateral cooperation between the two entities and provide QIC with access to the “Jadeer” portal, the database of local SMEs, and develop Qiddiya as a destination that provides an open and supportive business environment for SMEs.

Philippe Gas, the CEO of QIC noted, “These two MoUs reflect our continuous effort to enhance cooperation and strategic partnerships with local entities involved in national transformation, in line with the ambitions of Saudi Vision 2030.”

Gas also emphasized, “These MoUs mean that local SMEs will be able to easily access information about the Qiddiya project and the numerous opportunities available in QIC.”

The comments were made after the deal with Monsha’at Governor Saleh bin Ibrahim Al Rasheed was signed off by Philippe Gas of QIC.

Governor of Monshaat Eng. Saleh bin Ibrahim Al-Rasheed remarked, “These MoUs highlight Monshaat’s keenness to enhance cooperation with the public and private sectors and to create an environment that stimulates the growth and prosperity of small and medium-sized enterprises.”

He stressed, “It will help to increase competitiveness and will contribute to the development of local entities by boosting and developing the standard of SMEs in the Kingdom.”

“It will also support them to reach the opportunities provided by the public and private sectors, including those offered by QIC”, the Governor also highlighted.

Under the first MoU, QIC will provide Monshaat with commercial opportunities across the key sectors of hospitality, tourism, and entertainment encompassing all areas of the business such as contracting, supply, logistics, IT, maintenance, public services, and many more.

Certain conditions will need to be fulfilled by service providers, that will help Monshaat to rehabilitate SMEs and formulate policies, standards, and strategies to raise the productivity of these enterprises and increase their contribution to the GDP.

This will eventually enhance the contribution of local entities to the major projects which are presently being implemented in the Kingdom and are in the pipeline for implementation after their company registration in Saudi Arabia.

Monshaat will help QIC build its innovation center that would benefit from Monshaat’s experience in this field and will also give QIC access to its research facilities and centers.

Moreover, Monshaat will provide access to Qiddiya of statistical information to be used in developing Qiddiya’s various project sectors.

The second MoU will give Qiddiya access to Monsha’at’s “Jadeer” portal, a database of SMEs operating in the Kingdom of Saudi Arabia and categorized by sector including a list of emerging companies that benefit from business incubators.

This access to the digital and research facilities of Monsha’at will give Qiddiya easier communication between QIC and other entities in sectors where there exist opportunities for collaboration and will also improve the decision-making process for the QIC and make it an attractive environment for SMEs and emerging companies.

This initiative comes as an important recognition of Saudi Arabia’s broader economic and social outlook focusing on boosting SMEs to a level that they can contribute significantly to Saudi gross domestic product by 2030 through meaningful business collaboration with foreign entities aspiring for new business setup in Saudi Arabia.

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Saudi Arabia Exploring Ways to Enhance Bilateral Relations with France to Boost Its Digital Economy
  • Newsletter, Saudi Arabia

Saudi Arabia Exploring Ways to Enhance Bilateral Relations with France to Boost Its Digital Economy

It was in the news recently that Saudi Arabia has been actively pursuing to promote its bilateral relations and collaborative efforts with France to boost the digital economy.

It is not new and during 2018 April, Saudi Arabia’s Crown Prince Mohammed bin Salman had met President Emmanuel Macron for putting discussions on collaboration in the digital economy and renewable energy sectors with a shared vision and forward-looking investments for company formation in Saudi Arabia.

The two countries are looking to expand beyond mere business and investments and working on technology and knowledge transfer efforts in the areas of digital technology and entertainment.

In a meeting held in the recent past, Saudi Arabia’s Minister of Communications and Information Technology Eng. Abdullah bin Amer Al-Sawahah has discussed with the Ambassador of France to the Kingdom of Saudi Arabia Ludovic Pouille, various measures of enhancing initiatives in these areas.

Saudi Minister Eng. Al-Sawahah emphasized the Kingdom’s digital structure supporting megaprojects, the presence, and availability of a supportive digital legal framework besides the human capital of national cadres with a high degree of professionalism that contributed to accelerating Saudi Arabia’s digital transformation.

The minister also highlighted that Saudi Arabia is striving for developing capabilities and capacities in the telecommunications and information technology sectors by increasing Saudi National cadres and supporting raising participation from Saudi women.

The two national representatives also reviewed Saudi Arabia’s efforts towards stimulating innovation and investment in the overall technology sector including new business setup in Saudi Arabia and other investment opportunities for French technology companies in the Kingdom’s telecommunications and information technology sector.

Digital technologies are a crucial aspect of Saudi Arabia’s economic diversification plan Vision 2030 that was launched in 2016.

Vision 2030 put forward several strategic goals for the Information and Communication Technology (ICT) sectors including the expansion of high-speed broadband coverage to 90% of households in densely populated cities and 66% of households in other urban areas.

The vision also aimed at strengthening partnerships with the private sector for the development of new ICT infrastructure and enhance the expansion of digital services in society to curb unnecessary bureaucracy.

Saudi Arabia’s Vision 2030 heavily relies on the experience and technological know-how of friendly nations including France to realize its objectives. There are mega-projects in Saudi Arabia where France is already contributing, mainly in the field of tourism and hospitality.

France’s relations with Saudi Arabia are old and apart from technology, business and investments also focus on common strategic interests such as preserving security in a troubled region, the mutual commitment to combating terrorism, and a convergence of views on regional crises. There are regular periodic bilateral official visits between the two countries that demonstrate a strong and strategic partnership between France and Saudi Arabia.

There are discussions and dialogues in many areas that create a solid ground for confidence and regular pass official exchanges on bilateral issues including human rights, fundamental freedoms to women most important to France.

Digitalization affects every aspect of Saudi life and can improve production, services, including healthcare, agriculture, transport, education, climate change, and public governance. Keeping this in mind Saudi Arabia formed the 2020 Digitization Task Force and framed many policy actions.

The task force tabled the main four recommendations namely Enabling and Supporting Resilient Digital Infrastructure, Supporting the Healthy Development and Adoption of Artificial Intelligence (AI), Laying the Foundations for Smart Cities, and Driving Digital Inclusion and Growing Digital Skills.

Areas of Smart Infrastructure, Energy, Transport, Water and Waste, Social and Buildings have been identified as key areas based on which key policy actions have been framed.

The Kingdom of Saudi Arabia also identified many Elements of ICT Infrastructure needed for smart cities such as data warehouses, sensors, and actuation Technology, networks, advanced applications, and analytics.

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Kingdom of Saudi Arabia Reaffirms Its Plan to Invest Over 100 Billion USD in India
  • Newsletter, Saudi Arabia

Kingdom of Saudi Arabia Reaffirms Its Plan to Invest Over 100 Billion USD in India

Saudi Arabia has made it clear on Sunday,13th December 2020 that its investment plans in India have not gone out of track and expressed confidence saying Indian economy has all the potential to bounce back from the adverse effects of the deadly coronavirus pandemic and will attract increased FDI inflow and new company-registration-in-India.

In February 2019, an investment of more than USD 100 billion in various sectors including petrochemicals, refining, infrastructure, mining and manufacturing, agriculture, etc. was announced by the Kingdom’s crown prince, Mohammed bin Salman. Recently, Saudi Ambassador Dr Saud bin Mohammed Al Sati reaffirmed Riyadh’s plan of 100 billion dollar investment in India.

“Our plans to invest in India are on track and we are in discussion to prioritize investment opportunities in several sectors in both countries,” Ambassador Dr Al Sati remarked.

He added that the Indian economic revival will help support other nations. He also praised the Indian government’s proactive measures and economic relief package, saying, “The economic relief package provided by India for its most prominent sectors is commendable. As the fifth-largest global economy and the largest economy in South Asia, the Indian economy has the impetus to recover from the impact of the ongoing pandemic”.

“The Strategic (Partnership) Council set up by two countries in 2019 has opened new avenues on partnership in strategic areas like defence, security and counter-terrorism, and renewable energy”, Dr Al Sati noted.

Saudi Public Investment Fund (PIF) had planned for an investment of $1.3 billion in Reliance Retail and $1.5 billion in Jio. He also added that the Saudi Aramco, the state-owned petroleum and natural gas company, is upbeat about India’s energy sector and also has investment plans. He also noted that the recent Labor Reform Initiative (LRI) will further reinforce economic ties between the two countries and facilitate setting–up–a–company–in–India.

The government fund acquired a 2.04 per cent stake in Reliance Retail venture, an ecommerce business running more than 12,000 stores across different cities in India.

As per Ambassador Saud Al-Sati, Saudi Arabia values India as a strategic partner and close friend. Ambassador Al-Sati remarked both countries are cooperating to create and strengthen partnerships in the defence and security sphere by training, knowledge sharing and fighting against terrorism.

“The Strategic Partnership Council set up by the two countries in 2019 has opened new avenues on partnership in strategic areas like defence, security counter-terrorism, energy security and renewable energy,” he added.

He also said the economic recovery of both countries will help promote the economic growth of other countries in the region.

“This investment will further strengthen PIF’s presence in India’s dynamic economy and promising retail market segment,” the fund said.

This latest expansion in India follows an earlier acquisition of a 2.32 per cent stake in Jio Platforms, the digital services unit of Reliance Industries.

The Reliance business group of India has interests in oil, petrochemicals and telecoms, and is controlled by Indian billionaire Mukesh Ambani who is leading the Reliance group in making huge investments now in the booming technology sector.

India’s retail industry tops the global list and accounts for an approximate 10 per cent of the country’s gross domestic product, however, the sector has been badly impacted by the covid pandemic and in turn, adversely affected the wider economy too.

“This investment further demonstrates PIF’s commitment to generating returns for the Saudi people and driving the economic diversification of Saudi Arabia,” highlighted the fund’s Gov. Yasir Al-Rumayyan.

With a belief that investment flows in both directions, the Saudi Investment Ministry announced granting of investor licenses to 306 international companies in the Kingdom during the third quarter of 2020, an increase of 96 per cent license issuance over the previous quarter.

Investment Minister Khalid Al-Falih remarked that the latest figures suggesting a phenomenal increase in investor license issuance show that the Kingdom can retain the long-term trust and confidence of the global investor community, and is steadily moving towards “steady and positive” economic recovery.

Analysis of the investors’ data reveals that India topped the list of foreign companies who were granted licenses in the KSA, followed by Egypt and the UK.

The business sectors with the highest number of new investors have been primarily in services sectors including education, financial services and housing and followed by the manufacturing industry and transport and logistics business.

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The New Saudi Arabia Professional Companies Law
  • Newsletter, Saudi Arabia

The New Saudi Arabia Professional Companies Law

Saudi Arabia has enacted a new Professional Companies Law (PCL) that will have a direct effect on professional partnerships existing in the Saudi Arabian market including those providing engineering consultancy, legal and accounting services to name a few as well as the new entrants in the market.

A Royal Decree was issued on 25th September 2019 approving the issuance of the new Professional Companies Law and the Saudi Ministry of Commerce and Investment issued the implementing Regulations of this new law on 26th March 2020 (together “The New Professional Companies Law”) that marks a welcome development in the professional services field.

The New Professional Companies Law has now entered into force and is in effect in the Kingdom of Saudi Arabia.

The New Professional Companies Law (PCL 2020) represents a sea change of its predecessor which was issued 29 years ago in 1991 in how professionals will be able to constitute their businesses. The PCL 2020 markedly addresses some of the fundamental limitations of the old law many of which are resolved in the new PCL.

The PCL defines a Professional Company as

  • “a civil company that operates independently, which is incorporated by an individual (or more) who are licensed to legally carry out one (or more) profession, or with others, for the purpose of practising professions.”

The concept of Profession in Saudi Law, therefore, lies in business activities which require a professional license granted by a legally recognized regulatory body. This will include legal, audit, engineering, accounting and any other activities of identical nature.

Under the old law, professional companies could only be formed via one single vehicle of incorporation, being a general partnership with unlimited liability for their partners. Under the new PCL 2020, the vehicles of incorporation have been expanded and professional companies in the Kingdom of Saudi Arabia can now be formed as

  • General Partnerships as in the old law
  • Limited Partnerships
  • Joint Stock Companies (including single shareholder Joint Stock Companies)
  • Limited Liability Companies ( including single shareholder Joint Stock Companies)

The flexibility of choosing a vehicle under PCL 2020 for the intended professional company is a welcome improvement and will help the investors who would prefer to incorporate their businesses in a form other than General Partnerships.

The ability to form a professional company as a single shareholder limited liability company or single shareholder joint-stock company should provide investors who wish to have absolute control that flexibility and autonomy.

Another major development under PCL 2020 is the permissibility of professional companies to undertake more than one distinct profession as one professional company engaged in engineering consulting may also provide accounting services.

This new development under PCL 2020 may make inroads for strategic consortiums across different disciplines which was not a choice under the old law.

The new PCL 2020 also allows for a natural person who is not a licensed professional or a juristic person to be a partner or shareholder in the professional company incorporated as a limited liability company or a joint-stock company. The new law thus essentially permits unlicensed parties to potentially bring strategic benefits such as business knowledge, capital and liquidity to the professional company and possess its ownership.

Under this new law, however, the unlicensed parties can’t own more than 30 per cent of professional company’s capital and this threshold of 30 per cent can only be increased by the Minister of Commerce.

The new as well as the old professional companies law refers to the MOC, Ministry of Commerce as the sole regulator of professional companies.

The new PCL 2020 can be seen as a new dawn for professional companies existing in the Saudi Arabian market and desiring to restructure their holdings as well as the prospective entrants who don’t currently have a presence in the Kingdom and are looking for a professional company formation in Saudi Arabia.

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Saudi Arabia And The UN ITU Sign MOU to Collaborate on AI Optimization Globally
  • Newsletter, Saudi Arabia

Saudi Arabia And The UN ITU Sign MOU to Collaborate on AI Optimization Globally

Saudi Arabia represented by the Saudi Data and AI Authority (SDAIA) and the International Telecommunication Union (ITU) of the United Nations has recently reached a Memorandum of Understanding (MOU) to collaborate on initiatives aimed at supporting, strengthening and optimizing the benefits of Artificial Intelligence (AI) for sustainable development globally.

During the Global AI summit hosted in Riyadh, the Saudi ITU MOU was signed on the second day for making AI best practices available to everyone on this planet. In this collaborative agreement, Saudi Arabia will support ITU in developing initiatives, activities and projects facilitating the UN Sustainable Development Goals (SDGs) through international cooperation, knowledge sharing and multi-stakeholder participation.

As per Saudi Press Agency (SPA), this MOU announced with ITU in a virtual ceremony organized during the Global AI summit 2020 will help to develop an internationally recognized system for mobilizing resources and providing assistance to institutions willing to adopt AI technologies. Dr. Abdullah bin Sharaf Al-Ghamdi, the President of the SDAIA welcomed this MOU as a significant step towards new investments and company formation in Saudi Arabia.

Al-Ghamdi said,” The ITU will share best practices in the field of AI with the Kingdom. This will help in shedding light on how to sponsor and support emerging companies and new incubators in the national space, especially as there is no official framework that currently exists to support the AI readiness of countries and international cooperation.” As per the President,” Around the world, nations have recognized the transformative potential of Artificial Intelligence and are preparing themselves to harness the benefit of AI to support their development strategies and goals.”

“With this announcement of this MOU, Saudi Arabia intends to support ITU to design activities that will help strengthen global efforts to use AI technologies for the advancement of sustainable development and growth. SDAIA has been established to drive AI programs in the Kingdom, and enable Saudi Arabia to become a global leader in AI. Through this partnership we will support the sharing of knowledge and experience among all nations, to further the use of AI for the benefit of humanity.” HE Dr. Al- Ghamdi highlighted.

In his address, the ITU Secretary-General Houlin Zhao said, ” AI is being used to tackle the world’s most pressing challenges, from climate change to the Covid-19 pandemic.” He also greeted the announcement of the MOU and said that the UN agency also looked forward to this partnership with SDAIA for developing initiatives and projects in AI technologies and promoting sustainable developments on a global scale.

The Secretary-General of the ITU also emphasized the importance of this collaborative agreement saying,” We dream of a world where nations harness the power of AI together, where we all exchange ideas and best practices, where we collaborate to unlock the full potential of AI. He also reiterated, “With AI impacting every aspect of today and tomorrow, collaboration is needed more than ever.”

Founded in 2019, the SDAIA is a world-class governing body to drive the Kingdom of Saudi Arabia’s AI innovations and ecosystems and also to lead AI optimization for global economic development and growth.

The Global AI Summit hosted by SDAIA is an international meet and brings the world’s important decision-makers, technologists and investors under a common Umbrella. Human welfare being the driving theme, this event recognizes the global disruption of the Covid pandemic and explores the transformative potential of AI and Smart Technologies to effectively handle the post covid new normal and make the world a better place to live. It is now evident that new AI startups and established global players will now be increasingly attracted to Saudi Arabia and look for how to open branch office in Saudi Arabia.

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A Peek into Saudi Arabia’s Vision 2030 and the Future It Holds
  • Article, Saudi Arabia

A Peek into Saudi Arabia’s Vision 2030 and the Future It Holds

Saudi Arabia’s vision 2030 was developed in 2016 and was centered on three primary themes – a vibrant society, a thriving economy and an ambitious country. The iconic vision was built by the Council of Economic and Development Affairs, which is chaired by Deputy Crown Prince Mohammed bin Salman. The vision encompasses several reform strategies and goals for Saudi Arabia’s long term economic success. This widely includes the creation of a sovereign wealth fund, reduction in subsidies, opening Saudi Aramco (Saudi Arabian Oil Company) to private investment through a partial IPO and reforms to multiple industries such as tourism and defense. To achieve a vibrant society, Saudi Arabia is planning to focus on its citizens and the Islamic faith. This will happen through numerous commitments. This includes increasing the number of Umrah visitors from 8 million to 30 million annually, establishing the largest Islamic museum in the world and doubling the number of Saudi heritage sites registered with UNESCO. To achieve economic success, the Kingdom is planning to diversify its economy and create dynamic job opportunities for its people. This will happen through commitments to innovation, education and entrepreneurship.

Company registration in Saudi Arabia is expected to get a whole lot easier now. To become an ambitious country, Saudi Arabia will be focusing on transparency, accountability and effectiveness in its governing strategy. Only through solid foundations can sustainable success can be achieved.

Saudi’s vision 2030 plan includes strategic objectives cascading down to the nation’s public sector entities and vision realization programs, 12 of which have already been rolled out. With all these ambitious programs, Saudi Arabia plans to overcome its oil dependency with a well-diversified, dynamic and modern economy. Since vision 2030’s conception in 2016, Saudi Arabia had made progress towards diversifying its economy and decreasing its dependence on oil revenues. The large scale reforms, which included a fiscal balance program, had been supported by decisions which improved the overall quality of life in Saudi Arabia by benefitting residents and attracting domestic and foreign investments. Growth has opened up new jobs for Saudi Arabian citizens in main areas through the partial privatization of sectors such as healthcare and housing. The nation had also prompted business setup in Saudi Arabia. In 2019, Saudi Arabia had jumped 30 spots in the World Bank’s Ease of Doing Business 2020 index – the biggest improvement and highest jump worldwide.

In 2020, Saudi Arabia decided to evaluate the vision 2030’s goals after four years of its launch. However, with the dramatic shock to the oil prices, the coronavirus pandemic has hit Saudi Arabia’s economy hard. Dropping oil prices, disruption of global trade and financial markets, an indefinite pause on industries like tourism, and huge lost productivity in the government and private sector has cast an uncertain spell for the future of the Saudi plan. Notably, even before the outbreak of the pandemic, the nation was facing some challenges like the murder of journalist Jamal Khashoggi in Istanbul, increasing tensions with Iran, which had taken focus off Saudi’s economic reform efforts.

According to a study report by the University of Bath, the main obstacles or challenges with Saudi Arabia’s Vision 2030 are the uncertainties surrounding its launch and potential for success. This originates from its stated objectives that can only be described as ambitious because of the scope and magnitude of the undertaking – not to mention that only 15 years (relatively short period of time) has been set to achieve the aforementioned objectives.

Furthermore, there is a shortage of information about the detailed plans that will help in realizing the intended macroeconomic and socio-political renovation. Apart from this, the seemingly slow response from a number of governmental and quasi-governmental institutions in announcing their detailed plans and programs has added to this existing uncertainty.

According to Atlantic Council data, Saudi Arabian government has invested a significant amount of money, energy and effort in the Vision 2030 reforms and it has yielded some noteworthy achievements to date. This broadly includes fiscal stabilization and macroeconomic management, the development of capital markets and the banking system, the digitization of government services, and transformed social reforms. However, in several other areas, reform efforts have not proven themselves successful with respect to their intended objectives. This can notably be seen most in creating jobs and reforming the private sector into an engine of growth.

Doing business in Saudi Arabia may be easier and more efficient with some external professional help. The good news is that Saudi Arabia has already recognized the fundamental reforms required for the nation’s long-term economic growth, and it has started the work of implementing many of them.

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Social Development Bank provides 9 billion Riyals in Pandemic Relief to Small Businesses and Self-employed Entrepreneurs
  • Newsletter, Saudi Arabia

Social Development Bank provides 9 billion Riyals in Pandemic Relief to Small Businesses and Self-employed Entrepreneurs

On May 2nd, Saudi Arabia’s state news agency announced that Social Development Bank introduced an initiative package that would provide small businesses and sole proprietorships with 9 billion Riyals ($2.4 billion USD) in Coronavirus relief funds.  This could help aspiring entrepreneurs with their business set-up in Saudi Arabia.  In addition to the funding, SDB is also providing a 6-month grace period for installment repayment effective April 1st. The financial boost has been given to counter the slowdown in the economy and will help businesses find the right footing again. 

Of the 9 billion Riyals, 8 billion ($2.1 billion USD) will go towards assisting roughly 6,000 businesses.  Additionally, the primary focus of the newly created portfolio will be entities in the health care industry as is the need of the time.  According to SPA, the state news agency, the initiative will include easier, flexible financing channels through micro-funding mediators for families and self-employed individuals beginning April 1st as well.  For many entrepreneurs that were in the pre-launch stage, this will help with company formation in Saudi Arabia. It will give the businesses the financial impetus it needs to incubate and grow even in these troubled times. The government has taken into account the current taxes and other financial considerations and balanced it with the initiative package.

In addition to the above, the initiative includes a health care portfolio that would add an additional 1,000 medical units in order to raise operational capacity. 

As with other countries worldwide, Saudi Arabia has taken action to counteract the economic effects of the Coronavirus pandemic by providing financial assistance to those small businesses and self-employed entities that have suffered the most.  Plus, the increase of medical units for additional operational capacity will enable the health care sector to manage any cases that may arise in the coming months.  When this is combined with social distancing practices, it will help us all get through this safely.

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