Market Entry Guide Saudi Arabia.

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1. Introduction
2. Modes of Setting up a Business in Saudi Arabia
   1. As a Company
   2. As a Foreign Company
   3. Foreign Investment Act
   4. Average Time (in Days) Required for Setting up a Business
3. A Study on Procedures for Immigration
   1. Visa Policy of Saudi Arabia
   2. Types of Visa
   3. Procedures for Obtaining Work Permit
   4. Average Living Costs for Expatriates
   5. Average Cost of Office Space
   6. Overview of the Office Market in Major Cities of Saudi Arabia
4. Social Security System in Saudi Arabia
   1. Introduction
   2. Scope of Social Insurance Law [Article (4)]
   3. Benefits as per the Branches of Insurance
5. Free Trade Zones in Saudi Arabia
   1. TUSDEER
   2. Economic Cities
6. Opening a Bank Account in Saudi Arabia
   1. Procedure for Opening a Bank Account
7. Recruitment of Local Staff
   1. Brief Overview of Labour Laws
   2. Major Recruitment Agencies and Websites
   3. Average Salary
8. Taxation
   1. Introduction
   2. Zakat Duty
   3. Income tax
   4. Tax Incentives
   5. Agreements to Avoid Double Taxation
9. Appendix
   Appendix I: Useful Links and Addresses
10. Disclaimer

1 Introduction

The Kingdom of Saudi Arabia (KSA) is the largest country on the Arabian Peninsula. The country is a monarchy based on Islam and its judicial system is based on the Shariah (Islamic law). The king is the head of the country and its judicial system and has the right to grant pardons and make final decisions.¹ Currently, the country is being headed by Abdallah bin Abd al-Aziz.²

Saudi Arabia is a free market economy. It is the world‘s largest producer and exporter of oil.³ In 1999, the country’s GDP at constant prices including import duties was EUR 155 billion, growing at a rate of 22.1 percent to reach EUR 321 billion in 2008. The oil sector contributed 61 percent of GDP at current prices in 2008, whereas the rest is attributed to the non-oil sector. The non-oil sector GDP grew 6.8 percent and the oil sector GDP grew 34.9 percent in the same year. In 2008, inflation in the country was 9.9 percent. In 2008, the value of total imports was EUR 79 billion and the value of goods exported was EUR 214 billion.⁴

In 2008, the major export commodities included petroleum and petroleum products, and the major export partners were the US, Japan, China, South Korea and Singapore. The major import items of the country in 2008 were machinery, equipment, food items, vehicles, textile and chemicals. The major import partners were the US, China, Japan, Germany and Italy.⁵

As part of its aim to diversify the economy into other sectors, the country became the member of the World Trade Organisation (WTO) in 2005. The government of Saudi Arabia is also establishing six economic cities in various regions to attract foreign direct investment in diversified sectors.⁶

In 2008, the country received FDI of EUR 7 billion, the highest among the Gulf Cooperation Council (GCC) countries. There has been a considerable rise of 57 percent in FDI coming into the country from 2003 to 2008.⁷ The major sectors receiving FDI in Saudi Arabia were real estate, petrochemicals, refining, construction and trade.⁸ The country is planning to bring more transparency into the operations of its stock exchange Tadawul to attract more FDI.⁹

The following report aims to discuss the most important issues pertaining to the administrative, legal and financial aspects of setting up businesses and hiring personnel, as well as the living conditions in the Kingdom of Saudi Arabia.

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2 Modes of Setting up a Business in Saudi Arabia

This section discusses the common investment vehicles available to foreign investors, the procedures to be followed in order to establish them and related regulations for each investment mode.

Table 1 lists the most common modes of setting up businesses by foreign investors and the legal particularities involved in each process.

Table 1: Different Modes of Setting up a Business in Saudi Arabia

MODES OF SETING UP A BUSINESS
As a Company	Joint Liability Company Limited Partnership Limited Liability Company Professional Firms Joint Stock Companies
As a Foreign Company	Foreign Companies Contracting with Government Bodies Branches of a Foreign Company Scientific and Technical Offices of Foreign Companies

Ministry of Commerce and Industry - Applications & Procedures

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2.1 As a Company¹⁰

A company, as described by the Regulations for Companies in Saudi Arabia, is a contract whereby two or more persons each undertake to participate in a profit project by providing a share of money or labour to share in a resulting profit or loss.

A company, except a particular partnership, is a separate legal entity.

2.1.1 Joint Liability Company

A Joint Liability company is defined as a company which consists of two or more partners liable in all their possessions for the company’s debt.

2.2.1.1 Procedure for the Establishment of a Joint Liability Company

The formal procedure for setting up a joint liability company is detailed below:

An application is filed to the General Department of Companies, Ministry of Commerce, by any one of the partners or their assignees.

• The draft Articles of Association are also enclosed with the application.

The partners may use Form No. 1.1 of the company contract prepared by the General Department of Companies as a guide for the Articles of Association.

• The application is referred to a notary public for entry in their records, after the approval of the General Department of Companies is obtained.

The authorised person will receive the following two documents before he applies to the notary public in the ministry to fix the inscription date:

• A referral letter by the notary public
• A contract ratified by the General Directorate of Companies

The partners or their attorneys are supposed to carry the following documents with them when they appear before the notary public to sign the contract:

• Numerous copies of the contract
• Several copies of the contract summary after obtaining approval by the Chamber of Commerce
• Two witnesses
• Proof of identity for each of the partners and witnesses

The contract summary is then published in a daily newspaper, which is circulated in the vicinity of the company’s head office.

An application is filed to the General Directorate of Companies to register the company, along with the following documents:

• Two copies of the notarised contract
• Two copies of the newspaper in which a contract summary is published

Either the manager of the company or one of the partners or legal attorney then visits the office of the register for the completion of the registration process with the following documents:

The office ownership deed or the lease contract of the company premises

A document describing the partners’ decision of designating a manager of the company

In case one of the partners or the manager is a student, a certificate of regular attendance from the educational institution

Licensing from the concerned authorities, if required, depending on the company practices

Duplicate copies of the proof of identity of partners and the manager, along with original documents

The above documents and applications should be submitted in a hanger file.

The above documents are to be accompanied with the following documents and fee:

A duly filled in company registration application (Form 1), which is made to sign before the concerned official

Application fee of EUR 722.8 (SAR 4,000) must be paid for the initial five years

Once the original company registration certificate is issued, it is handed over to the company’s representative.

The procedure followed for making amendments to the articles, if required by the partners in the company, can be accessed through this link: Ministry of Commerce and Industry

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2.1.1.2 Ending a Joint Liability Company

According to Article (15) of Regulations for Companies, a joint liability company may come to an end due to the following reasons:

If a partner in the company dies

Interdiction among the partners

Declaration by the partners regarding their bankruptcy, insolvency or leaving the company if its period is indefinite

However, the company may continue to operate even after the death of any partner if it is included in the company’s contract that if one partner dies, the company, along with the partners and the remaining heirs, will continue to operate.

2.1.1.3 Liquidation of a Joint Liability Company

The liquidation procedure is governed by the provisions of Part XI of Regulations for Companies.

The liquidator of the company reports to the Office of Commercial Registration after

• The liquidation process is over
• The transfer of the documents (for the removal of the company from commercial registration) from the General Directorate of Companies to the Commercial Registration Office has happened

The liquidator then completes and signs Form 11.

The liquidator forwards the original commercial registration document and receives a certificate of liquidation.

2.1.2 Limited Partnership

A Limited Partnership consists of two teams of partners including at least a general partner liable with all their money for the company’s debts, and another group comprising at least a limited partner liable for the debts of the company to the extent of their share in the corporate capital.

The provisions for a limited partnership are similar to those of a limited liability company with regards to the following:

Nature of shares

Share assignment

Provision announcements

The company summary should comprise the following information:

The number of shares pledged by the limited or dormant partners and the amount of shares pledged by them

The provisions governing the relations of partners

The provisions relating to the management of the company

The provisions of departure reasons

However, it does not require including the limited or dormant partners.

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2.1.3 Limited Liability Company

A limited liability company consists of two or more partners, who are liable for the company’s debts to the extent of their shares in the corporate capital. Its characteristics are as follows:

The maximum number of partners in the company is 50

The corporate capital of this business type cannot be less than EUR 90,350 (SAR 500,000 (Saudi Riyals)).

2.1.3.1 Procedure for Establishment of a Limited Liability Company

The following points provide information on the procedure for the incorporation of a limited liability company:

An application is filed to the General Directorate of Companies.

The application should include the following documents:

• Numerous copies of the draft Articles of Association (Articles of Association can be drafted as Form 1.6)
• A certificate/approval from the Directorate of Computer in the ministry, ensuring that no other company has been registered under the same name. In case of no such prior registration, the name is announced.

The application is then referred to the notary public. This happens after the examination and approval of the contract by the Directorate of Companies.

The authorised person will then receive the following two documents before he applies to the notary public in the ministry to fix the inscription date:

• A referral letter by the notary public
• A contract ratified by the General Directorate of Companies

The partners or their attorneys are supposed to carry the following documents with them when they appear before the notary public to sign the contract:

• Numerous copies of the contract
• Two copies of the contract summary after obtaining approval by the Chamber of Commerce
• Two witnesses
• Proof of identity for each of the partners and witnesses

Once the contact is in place, the contract summary is published by the manager of the company in the Um Al-Qura newspaper.

The Directorate of Companies is approached to apply for the registration of the company. The following documents should accompany the application:

• Two copies of the notarised contract
• Two copies of the publication receipt of the contract summary in the Um Al-Qura newspaper
• An undertaking to provide two copies of the newspaper in which the summary is published
• A document describing the partners’ decision of designating a manager of the company
• A certificate, showing the deposit of the corporate capital, from a local bank and a clause stating an undertaking from the bank to keep the amount until the company has been commercially registered
• In case of a foreign partner, a copy of the approval of the Saudi Arabian General Investment Authority (SAGIA) is also required

The above documents and applications should be submitted in a hanger file.

The Directorate of Companies maintains a copy of these documents and asks the Office of the Commercial Registration to enter the company name in the commercial register.

Either the manager of the company or one of the partners or a legal attorney then visits the office of the register for the completion of the registration process with the following documents:

The office ownership deed or the lease contract of the company premises

In case one of the partners or the manager is a student, a certificate of regular attendance from the educational institution

Licensing from the concerned authorities, if required, depending on the company practices

Duplicate copies of the proof of identity of the partners and the manager, along with original documents

The above documents and applications should be submitted in a hanger file.

The above documents are to be accompanied with the following documents and fee:

A duly completed company registration application (in Form 2), which is signed before the concerned official

The application fee of EUR 1,084.2 (SAR 6,000) must be paid for the initial five years

The company’s certificate of registration is handed over to the company’s representative after its issuance.

The procedure followed for making amendments to the Articles of a limited liability company can be accessed on the website of Ministry of Commerce and Industry.

2.1.3.2 Ending a Limited Liability Company

The limited liability company would cease to exist due to any of the reasons described in Article (15) of Regulations for Companies.

2.1.3.3 Liquidation of a Limited Liability Company

The procedure followed for the liquidation of a limited liability company is similar to the procedure followed for liquidating a joint liability company, already explained in Section 2.1.1.3 of this document.

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2.1.4 Professional Firm

Professional firms have been classified by the Ministry of Commerce and Industry as follows:

100% Saudi professional firms

Mixed professional firms

2.1.4.1 Procedure for the Establishment of 100% Saudi Professional Firms

The following points provide detailed information on the procedure followed to establish 100% Saudi professional firms:

A licensing application as per Form 1.14 is filed to the General Directorate of Companies. A copy of the company contract as per Form 1.15 should be attached to the application. The application should contain the following information:

• Company’s name and purpose of establishment
• Names of the partners, their professions and licence numbers
• Address of the company headquarters
• Names of the managers
• Names of the people who have the right to sign on behalf of the company

The Directorate of Companies shall examine the submitted documents according to the Professional Companies Regulations and its executive rules, and approve the contract.

• The concerned parties would then be directed to the notary public to get their contract inscribed in their records.
• The notary public will publish the contract summary in a daily newspaper, circulated in the area of the company’s head office.

An application is made to the Directorate of Companies to enter the company in the register of professional companies in accordance with Form 1.16 at the Directorate. The following documents must accompany the application:

• Copy of the notarised contract
• Copy of the newspaper in which the contract summary is published
• Copy of the entry fee receipt (the entry fees amount to EUR 903.5 (SAR 5,000) for five years
• Partners’ designation of the company manager/managers, if it is not included in the contract
• Copy of the headquarters’ ownership deed or the lease contract of the company’s headquarters
• Copy of the proof of identity of the managers, depicting their profession
• Valid copies of professional licences issued to practise their profession

After submitting the above documents, the company’s name will be entered in the respective register of the Directorate of Companies. Thereafter, a certificate shall be issued to the company.

In case the partners wish to open a branch, they are required to submit the following documents:

• A document stating the mutual decision of the partners to open a branch. This document should also detail the following:
  • The place of the branch and its complete address
  • The appointment of a manager
  • The licence to practise the profession.
• The proof of payment of the branch entry fees of EUR 361.4 (SAR 2,000)

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2.1.4.2 Procedure for the Establishment of Mixed Professional Firms

A mixed professional firm is a firm between licensed Saudi professionals and specialised foreign professional firms.

The licensing procedure for a mixed professional firm is detailed below:

An application (Form 1.17) for the establishment of a mixed firm is to be submitted. It should include the following information:

• The name and purpose of the establishment of the company
• Information required for the Saudi partners:
  • Names of the Saudi partners
  • Details of profession, licences and dates
• Information required for the foreign partners:
  • Names of the foreign partners
  • Their nationalities
  • Licence numbers and dates
  • Their original addresses outside the Kingdom of Saudi Arabia
  • Their passport numbers, dates and places of issuance
• Details of the company offices and names of its managers:
  The following documents must also be submitted:
  • A copy of the company contract (as per Form 1.15), duly approved by all the partners
  • A certificate of decent reputation and practice term of not less than 10 years from competent professional bodies in the country of foreign company. The certificate should indicate the following:
    • The company has a good reputation in the field of the profession.
    • The partners have practised the profession for a term of not less than 10 years without interruption.
    • The certificate must be duly certified and translated into Arabic.
  • An entry certificate issued in favour of the foreign company by competent foreign authorities of the country of origin, describing the number and date of the licence, duly translated into Arabic.
  • A document detailing the decision of the concerned company office appointment and designation of a permanent representative in the Kingdom. The certificate must be duly
    certified and translated into Arabic.
  • A document stating the intention of the foreign company to participate in the transfer of technical know-how and professional training to the residents of Saudi Arabia. The
    certificate must be duly certified and translated into Arabic.
  • Copy of articles of association of the foreign company abroad. The certificate must be duly certified and translated into Arabic.

The Directorate of Companies reviews all the submitted documents; however, licence approval lies with His Excellency, the Minister of Commerce.

• After his decision, the concerned parties are directed to the notary public to inscribe the contract in his records.
• A synopsis of the contract is published in a daily newspaper, circulated in the area of the company’s head office.
• To get the company documented in the register of professional firms, an application in Form 1.18 is submitted to the Directorate of Companies, along with documents as required in the case of a 100% Saudi professional firm. Details on the required documents have already been provided in Section 2.1.4.1.

Consequently, the company name is entered in the register at the Directorate of Companies. A certificate is then issued and delivered to the concerned parties.

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2.1.5 Joint Stock Company

The law differentiates between joint stock companies depending on their incorporation, licensing and capital subscription. The classification, according to the terms of incorporation, makes a difference between the companies licensed by Royal Decree and those licensed by the Minister of Commerce.

The Royal Decree licenses the following companies:

Franchise companies

Companies running public utilities

Companies that receive state subsidy

Companies in which the state is a shareholder, except Social Insurance and Retirement Pensions Department

Companies that are engaged in banking

The licence for companies other than those listed above is issued by the Minister of Commerce.

A classification of joint stock companies on the basis of capital subscription is provided below:

Table 2: Classification of the Joint Stock Companies based on Capital Subscription

TYPE	REQUIREMENTS
Those in which founders subscribe to a part of the corporate capital The rest is left for public offering	Corporate capital of not less than EUR 1.8 million (SAR 10 million)
Those in which founders subscribe to the entire corporate capital	Corporate capital of not less than EUR 0.36 million (SAR two million)

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2.1.5.1 Documents Required for a Licence Incorporation

The following documents must be submitted when applying for the licence incorporation of a joint stock company:

A document proving the economic feasibility of the company, unless submitted to another authority in the past

An application requesting a licence, addressed to the Minister of Commerce, and duly signed by five of the founders of the company. The application should include information about the following:

• The details of capital subscription
• The number of stocks restricted to the founders
• The number of shares subscribed by each of the founders

Articles of Association

Company statute in accordance with the regulations for Joint Stock Companies

2.1.5.2 Procedure for the Establishment of a Joint Stock Company

The following points provide information on the procedure followed for the incorporation of a joint stock company:

A letter requesting the initial approval of the company’s incorporation, addressed to His Excellency (the Minister of Commerce) is to be submitted.

Once approved, the application for the establishment of the company is submitted by five founders, along with the economic feasibility study attached to the application.

Draft Articles of Association and the draft statute of the company are required to be prepared.

Upon receiving approval from the ministry regarding the above documents, the founders are supposed to submit a certificate from a bank, establishing that the deposited capital has been paid.

Articles of Association of the company are then inscribed by the notary public in his records.

The founders or the legal counsel of the company then file a petition to be granted a Royal Decree or ministerial decision, licensing the establishment of the company.

The royal decree or ministerial decree is published in the official gazette.

A request for the initial public offering and subscription application shall be prepared in case a part of the company’s stock is placed for public offering.

• The request must be in accordance with Article (55) of Regulations for Companies.
• It must be made within 30 days of the date of publication referred to in the previous item and after the public offering of stocks and allocation.

Studying draft allocation rates.

A constituent assembly of the company shall be held to look unto its agenda mentioned in the Regulations for Companies, and shall be announced in the daily newspapers and the official gazette, and be held after 15 days from the date of publication of the invitation.

The founders are required to submit an application to the Minister of Commerce to proclaim the establishment of the company, accompanied by the following:

• The company statute endorsed by the Constituent Assembly
• Notarised Articles of Association
• Minutes of the meeting of the Constituent Assembly signed by the President and his secretaries

Thereafter, the decision regarding the announcement of the creation of the company shall be issued by His Excellency, the Minister of Commerce.

This decision as well as the Articles of Association with its statute shall be published in the official gazette.

Company stakeholders shall request entry into commercial registration after the Board of Directors appoints its Chairman and Chief Executive Officer.

The company shall be entered into commercial registration after the completion of the respective forms and payment of the fees levied on the company, i.e., EUR 1,445.6 (SAR 8,000) every five years.

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2.2 As a Foreign Company

2.2.1 Foreign Companies Contracting with Government Bodies

A foreign company contracting with government bodies can be divided into:

Foreign companies that enter into a contract with the government to carry out specific tasks

As a representative office of a foreign company that has entered into a contract with the government; the representative office supervises the activities and acts as a communication link with the main office

2.2.1.1 Procedure for the Establishment of Foreign Companies Entering into Contract with Government Bodies

The procedure carried out to obtain a temporary licence for foreign companies is provided below:

The foreign company applies for the licence within 30 days of signing the contract with the following documents:

• Entry application forms approved by a government department
• A copy of the contract entered into by the company and the government department
• A copy of the authorisation provided to the person managing the operations in Saudi Arabia; it should be in Arabic and if the authorisation is in a foreign language, the Arabic-translated copy must be obtained from the certified office
• If the foreign contractor also works as a consultant, a copy of the commercial registration or a copy of the licence of the Saudi agent allowing him to carry out consultancy is required
• A copy of the agency contract signed between the company and the agent in Saudi Arabia
• A certificate disclosing the financial position of business activities and deals of the company, issued by a bank that is approved by the Saudi Arabian Monetary Agency SAMA
• A statement authenticated by the Chamber of Commerce operating in the country of the company’s head office; the statement should include information about the work done by the company in another country similar to that which has been awarded to the company in Saudi Arabia
• Certificates proving that the similar work undertaken has been completed by the company
• A copy of the balance sheet and profit and loss account of the past two years; the financial information should be audited by a chartered accountant

After receiving approval from His Excellency and the consideration of the application by the Directorate of Companies, a licence for the period of implementation of the
contract will be issued. The licence is temporary in nature.

The company applies to the office of commercial registration to get itself registered in the commercial register.

The manager of the company has to visit the Commercial Registration Office to complete the registration procedure and submit Form 1.9. The form is to be signed by the concerned official. The manager has to make a payment for the registration, depending on the type of the company to be established.

The company official has to submit the following documents to the Commercial Registration Office:

• A copy of the manager’s passport (the person who is managing operations in Saudi Arabia)
• A copy of the manager’s residence permit and labour card
• A copy of the lease contract in the name of the company

The documents should be submitted in a hanger file.

Following these procedures, the company will be registered. A certificate of registration is provided to the manager.

The procedure for introducing amendments in the licence can be accessed on the website of the Ministry of Commerce and Industry.

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2.2.1.2 Procedure for the Establishment of a Representative Office for Foreign Companies Contracting with Government Agencies

The following points provide information on licensing procedures for opening a representative office for foreign companies:

An application form is submitted by a foreign company to the Directorate of Companies. The following documents are attached to the application:

• A recommendation from organisations, including a government organisation working in Saudi Arabia, a public institution, a company that has a government participation, a legal entity that has a contract with the company or an organisation
• A copy of the company’s Articles of Association
• A copy of the Membership Certificate of the company in its homeland
• A copy including the decision allowing the company to open its office in the country
• A copy including the information on the decision of the Board of Directors to authorise the manager of the office

All the above documents should be translated into Arabic by a certified translation office.

If the Directorate of Companies grants the approval, the Minister of Commerce arranges for the company to be licensed and also specifies the city in which the office of the company will be located and the number of employees in the company, considering its needs.

The staff working in the office can be increased after obtaining approval from the ministry that issued the licence.

The manager of the company visits the office of commercial registration and fulfils the registration and mobilisation requirements. The registration and mobilisation processes are completed through Form 9.

• The registrar signs the form
• The company manager has to pay the fee depending on the type of company
• The following documents should be attached to the form:
  • A copy of the manager’s passport (the person who is managing the operations in Saudi Arabia)
  • A copy of the manager’s residence permit and labour card
  • A copy of the lease contract in the name of the company

The documents should be submitted in a hanger file.

Following these procedures, the company will be registered. A certificate of registration is provided to the manager.

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2.2.2 Branch Office

A foreign company can open its branch office in Saudi Arabia. The section below describes the procedure followed and the documents required for the establishment of a branch office.

2.2.2.1 Procedure and Documents Required for the Establishment of a Branch Office of a Foreign Company

According to Foreign Capital Investment Regulations, a company has to receive the Saudi Arabian General Investment Authority’s (SAGIA’s) decision to open its branch.

The foreign company has to make an application to the General Directorate of Companies, along with the following documents:

• A copy of the company’s Articles of Association in its homeland
• A copy of the company’s commercial registration
• A copy including the decision of the partners in the company to open a branch in the country; the decision should also include information about the city in which the branch will be established and the manager designated to operate the branch

All of the above documents should be certified. The documents should be translated into Arabic by a certified translation office.

• A certificate issued by a local bank, which is approved for the purpose, proving that the deposit of branch capital has been made.

After examining the documents, the Directorate of Companies makes an application to His Excellency, the Minister of Commerce.

His Excellency (the Minister of Commerce) provides his decision regarding the branch office.

The Directorate of Companies writes to the Commercial Registration Office or the ministry branch to enter the company name in the commercial register.

The manager of the branch visits the registration office or the branch of the ministry to complete the registration process; he also fills in the required form.

The manager signs the form and pays the applicable fee.

The following documents should also be attached to the form and the registration application:

• A copy of the manager’s passport
• A copy of the residence permit
• A copy of the labour card
• A copy of the lease contract in the name of the company’s main office
• A copy of the decision made by SAGIA

All of the above documents should be submitted in a hanger file.

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2.2.3 Scientific and Technical Offices of Foreign Companies

Foreign companies are allowed to open offices in the country to provide technical and scientific services to their agents, distributors and consumers. The procedure for setting up a technical and scientific office is provided below:

The following documents are submitted by pharmaceutical companies:

• A copy of the company’s Articles of Association in its homeland
• A copy of the commercial registration
• A copy of the decision made by the owners of the company regarding operating an office in Saudi Arabia
  • The decision should include information about the city in which the office will be set up, the number of employees in the office and the designation of the manager of the
    proposed office.
  • The manager of the office should be a pharmacist.
• A copy of the approval given by the Ministry of Health
• A copy of the licence issued in the name of office pharmacists; licences are issued by the Ministry of Health

Documents required for setting up a scientific and technical office of a foreign company whose products are used in Saudi Arabia

A recommendation of the company’s agent to open an office

2.2.3.1 Registring the Office

The following points provide information about the registration of the office:

An application is made to the General Directorate of Companies to open an office of the parent company in the country.

The documents mentioned above should be attached to the application.

The General Directorate of Companies shall consider the application.

Approval is granted by the Minister of Commerce, allowing the company to open an office in the country.

On receiving approval from the Minister of Commerce, the company is issued the licence.

The Directorate of Companies applies for commercial registration through Form 1.3 to complete the registration procedure.

The Directorate of Companies has to sign the form in front of the concerned official and make payment of the fees outstanding.

The following documents should be attached to the form:

• A copy of the manager’s passport
• A copy of the residence permit
• A copy of the labour card
• A copy of the lease contract in the name of the company’s main office

All of the above documents should be submitted in a hanger file.

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2.3 Foreign Investment Act¹¹

The New foreign investment act of Saudi Arabia was introduced in the year 2000. The following details include some of the major elements of the new law.

The General Investment Authority issues licences for any Foreign Capital Investment in the country including permanent or temporary investments.

The Supreme Economic Council is responsible for issuing the list of activities excluded from Foreign Investment in the country.

The list of ‘Negative Activities’ includes the following:

• Manufacturing Sector
  • Oil Exploration, Oil drilling and production excluding the services related to the mining sector listed at 5115+883 in the international Industrial Classification codes
  • Manufacturing military equipment, uniforms and military devices
  • Production of civilian explosives
• Service Sector
  • Services catering to the military sector
  • Detective services
  • Security services
  • Real estate investment activities in the city of Makkah and Madina
  • Tourist services related to the Hajj and Umrah
  • Recruitment services including the operation of local recruitment offices
  • Brokerage in real estate services

In accordance with the law, a foreign investor can obtain more than one licence for different business activities. The additional legal measures shall be specified by ‘The Rules of Implementation of this Act’.

The foreign investor can freely reallocate the sums derived from the sale of his equity, or liquidation surplus if any, or profits generated by his facility in Saudi Arabia to another country.

The foreign investor possessing a licence will have full rights to purchase any real estate required to carry out the licensed activity or to provide housing to non-Saudi staff.

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2.4 Average Time (in Days) Required for Setting up a Business

In order to start off a new business, a number of legal procedures have to be followed.

Table 3 lists the data released by the World Bank related to starting a business in Saudi Arabia.

Table 3: Starting a Business in Saudi Arabia

DATA RELATED TO STARTING A BUSINESS	YEAR - 2010
Rank	13th (in the world)
Procedures (number)	4
Duration	5 days
Cost (percentage of GNI per capita)	7.7
Paid in Minimum Capital (percentage of GNI per capita)	0.0

The World Bank Group - Document: Doing Business 2010 Saudi Arabia

The figure below shows a comparison between various countries based upon the number of days and procedures required for setting up a new business:

Figure 1: Obstacles in Starting Businesses in Various Countries (2010)

World Bank – Doing Business 2010

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3 A Study on Procedures for Immigration

A foreigner visiting the Kingdom of Saudi Arabia should have a valid passport and entry visa issued by the Royal Embassy of Saudi Arabia or Consulate. Individuals with a residence permit should have an exit or an exit and re-entry visa issued by the Passport Department of the KSA.¹²

3.1 Visa Policy of Saudi Arabia¹³

All foreign nationals visiting Saudi Arabia should possess a visa. However, this condition is not applicable in the following cases:

If the foreigner is a national of Kuwait, Bahrain, Qatar, Oman or the United Arab Emirates

The foreign passenger is in transit, travelling on with the first connecting aircraft, or on board the same aircraft within 18 hours, provided:

• The foreigner should have valid onward or return documents
• He/She does not leave the airport premises
• He/She does not make any further landings in the country

However, nationals of Mali, Burkina Faso and Nigeria are required to carry a transit visa.

Foreigners holding ‘Landing Permits’ and re-entry permits issued by the Saudi Arabian Ministry of Foreign Affairs

The following people are prohibited from entering Saudi Arabia:

A person holding an Israeli passport or having a passport bearing Israeli stamps

A person who does not adhere to the Saudi conventions regarding behaviour and dress code

An intoxicated person

A pilgrim entering Saudi Arabia has to follow special regulations.

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3.2 Types of Visa¹⁴

Table 1 provides information about some types of visas issued by the Consulate of Saudi Arabia

Table 4: Types of Visa and Issuance Requirements

TYPE OF VISA	DURATION OF VISA	PERSON TO WHOM VISA IS ISSUED	MAJOR REQUIREMENTS / CONDITIONS
Visit visa for Commercial Purposes	A visa is valid for one month. It can be extended for another three months upon providing satisfactory reasons to the consulate.	Representatives of foreign companies and establishments, businessmen and investors	The issuing consulate must be informed about the confirmation of the investment prior to the issuance of the visa. Representatives of foreign companies who wish to visit the country to investigate business opportunities or study the Saudi market are granted visas in their own country if the union and Boards of Chambers of Industries and Commerce make the request for them. A visit visa can be granted to the wife of a representative or a businessman after their relationship is confirmed.
Multiple Visit Visa	A multiple visit visa is valid for a maximum of six months and the duration of a single stay cannot be more than one month.	People who need to visit the country repeatedly for short durations Applicants who need to visit Saudi companies for investing or contracting purposes	The visitor must have a valid passport. The applicant pays a visit on a transit ticket. The visitor has to present a letter from his company providing the following information: Commercial character of his visit Purpose of his visit Time of the visit Name of the company or establishment to be visited The name of the company or establishment should be provided at the top of the visa as well as the confirmation letter by the Saudi company inviting the visitor. The Saudi company inviting the visitor should have commercial registration and should be a member of the Chambers of Commerce and Industry in the Kingdom.
Work Visa	A work visa is valid for two years.	People who wish to work or carry out business in Saudi Arabia	The visa fee of EUR 361.4 (SAR 2,000) should be paid to the issuing entity after its issuance. The applicant is required to contact the Ministry of Foreign Affairs after 15 days of visa issuance by the issuing entity for sending the visa to the consulate abroad. The applicant (or on his behalf, the legitimate attorneyship) has to contact the concerned entity (or the official authorisation contact of the concerned entity). The applicant should contact the authority with the following documents: The origin or recruitment permission The collection orders issued after payment A duly filled in nationalityspecific form with information regarding the nationality The administration issues the visa and stamp after contacting the beneficiary or his representative in the general administration of visa control.
Visa of Iqama (Residence Permit)	The visa is valid for one year after its issuance.	Issued to the residents of Saudi Arabia wishing to recruit their family members (wife or son) or relatives	A resident who wishes to recruit his family members, including wife and sons, has to pay a fee of EUR 361.4 (SAR 2,000) for a single permission. If the applicant applying for a residence permit for his family members is employed in the government sector, he should provide the following documents: Recruitment permission issued by the granted entity Copy of his own Iqama or residence permit proving that he is working in the government sector Identification certificate issued from the employer to prove that he is still performing his duty Once these documents are provided, the general administration of visa control will examine the documents and authorise the consulate to grant the visa.

Ministry of Foreign Affairs - General Administration of Visa Control

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3.2.1 Other Types of Visa Issued by the Saudi Consulate

The following is a list of the remaining types of visa issued in Saudi Arabia:

Table 5: Other Types of Visa Issued in Saudi Arabia

TYPE OF VISA	LINK FOR DOWNLOADING THE REQUEST FORM	DESCRIPTION
Family Visit Visa	https://visa.mofa.gov.sa/VisaFamilyApp/FamilyApp.asp	The Family Visit visa is issued to visit family in Saudi Arabia. The duration of the permitted stay is six months.
Business Visiting Visa	https://visa.mofa.gov.sa/VisitWorkVisaApp/VisitWorkApp.asp	Business visas are issued to businessmen, investors and company representatives. It is issued within 24 hours of the application or on the same day provided all documents are made available.
Embassies and Organisation visit Visa	https://visa.mofa.gov.sa/VisitDVApp/VisitDVApp.asp	This visa is issued to the Embassies and government organisations visiting Turkey.
Personal Visiting Visa	https://visa.mofa.gov.sa/VisaPersonalApp/PersonalApp.asp	The visa is issued to a person coming to the country for personal purposes.
Tourist Visa	https://visa.mofa.gov.sa/VisaTourismApp/TourApp.asp	The visa is issued to a person coming to the country for travelling purposes.
Medical Visa	https://visa.mofa.gov.sa/VisaMedicineApp/MedicApp.asp	The Visa is issued to a person visiting the country for medical treatment.
Extending Reentry Visa	https://visa.mofa.gov.sa/VisaExtendReturn/ExtRetApp.asp	The visitor can leave Saudi Arabia to visit another country and reenter it within a specified duration through a Re-entry visa. The permitted period of stay outside Saudi Arabia is seven months, which is not applicable to students as they can stay outside for twelve months.
Hajj Visa	https://visa.mofa.gov.sa/VisaHajjApp/HajjApp.asp	The Hajj visa is issued to pilgrims. It is granted for free.
Student Visa	https://visa.mofa.gov.sa/VisaEduApp/EduApp.asp	Student visas are issued to students visiting the country for educational purposes.
Official government Visit Visa	https://visa.mofa.gov.sa/VisitGovVisaApp/VisitGovApp.asp	This visa is issued to the government officials visiting Turkey.

Royal Embassy of Saudi Arabia Copenhagen – Consular Services; Ministry of Foreign Affairs - Visa services in the Kingdom;
Royal Embassy of Saudi Arabia Budapest – Visa and Consular Services

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3.3 Procedures for Obtaining a Work Permit

A work permit is issued by the Ministry of Labour. It is issued to foreign nationals who wish to work, carry out business or invest in companies or organisations located in Saudi Arabia. A work permit is issued together with a residence permit or visitor visa.¹⁵

The following are some of the conditions to be met by a work permit applicant:¹⁶

His entry into Saudi Arabia should be legal.

He should be working under an employment contract with a Saudi employer or with an authorized non-Saudi employer under the Investment Law.

He should possess work-related abilities or educational qualifications as required by the state.

He should have a passport valid for at least six months.

He should be physically sound and not suffering from any diseases.

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3.4 Average Living Costs for Expatriates¹⁷

The cost of living for a foreign national in Saudi Arabia, whose lifestyle is that of an average western expatriate, will be similar to that of living in European nations. However, the cost of accommodation and food items, especially imported items, may be higher in the country. On the other hand, import duties on electronic goods is lower, therefore, prices of electronics such as TVs and DVD players is lower compared to European nations. Utilities such as electricity and water are less expensive due to the subsidies provided by the Saudi government.

Table 3 provides an overview of the cost of major expense items in Saudi Arabia:

Table 6: Monthly Cost of Major Expense Items Per Person

EXPENSE ITEM	DESCRIPTION	MONTHLY COST (IN EUR)
Housing	Rent for a one-bedroom apartment located in a modern block, with a swimming pool, satellite television and air conditioning, expenses of which are included in the rent	609.8
Food	Food does not include luxury food items and alcohol	304.9
Utilities	Includes water, electricity and telephone charges; (water charges are generally inclusive of sewage charges)	152.4
Leisure	Includes entertainment, dining out, sports, newspaper and magazine expenses	304.9
Transport	Includes running cost of an average-priced family car, and the cost of third-party insurance, petrol, servicing and repairs	50.8
Insurance	Includes private health, travel, car and contents insurance	67.7
Clothing	Low clothing requirement due to the very hot climate	101.6

Just Landed – Cost of Living

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3.5 Average Cost of Office Space¹⁸

The country has experienced an increase in the office space development over the last two years. A majority of the newly developed space falls in the ‘superior’ bracket. This is boosted by improvements in the economic condition of many people and rise in the number of international service providers in the country.

3.5.1 Rental Rates in Saudi Arabia

Table 4 provides the top Central Business District (CBD) rental rates in certain cities of Saudi Arabia in Q2 of 2009:

Table 6: Monthly Cost of Major Expense Items Per Person

CITY	RANGE OF RENTAL RATES PER SQUARE METRE PER ANNUM (SAR)
Riyadh	EUR 246.9–265.9 (SAR 1,300–1,400)
Jeddah	EUR 227.9–246.9 (SAR 1,200–1,300)
Khobar/Dammam	EUR 170.9–189.9 (SAR 900–1,000)
Makkah/Madinah	EUR 38–76 (SAR 200–400)

CB RICHARD ELLIS - Saudi Arabia Office Market - Q2 2009

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3.6 Overview of the Office Market in Major Cities of Saudi Arabia

3.6.1 Jeddah Office Market¹⁹

Jeddah’s office market is characterised by the undersupply of good quality office space. Previously, many villas in the city were converted into offices to accommodate the increased demand. This practice has since been banned by the authorities and is expected to result in a decline in occupancy and rental rates even after the estimated future development of another 350,000 square metres of space for all categories. The top rental rates in Jeddah are 5 percent below the rental rates in Riyadh.

3.6.2 Riyadh Office Market²⁰

Developers in Riyadh have constructed a large number of residential and office space to meet the rising demand from the local population and expatriate workers. However, demand for office space has not materialised as expected by developers. According to property consultant CB Richard Ellis, the market has shifted from a situation of undersupply to that of oversupply. He forecasts that the occupancy rate and rentals are likely to fall in the region owing to oversupply, caused by newly built buildings, in the next two years.

3.6.3 Dammam and Khobar Office Market²¹

The cities of Dammam and Khobar dominate the office market of the Eastern Province. The average occupancy rate in the cities is more than 90 percent, suggesting a shortage of office space. The cities do not have any clear laid out plans for downtown areas, and new office developments are shifting towards the major highways connecting the two cities. The top rental rates in Khobar are 30 percent less than those in Riyadh.

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4 Social Security System in Saudi Arabia

4.1 Introduction

The General Organisation for Social Insurance (GOSI) is the social security organisation of Saudi Arabia. It was established with the intention of applying social insurance rules in the nation, implementing its regulations, collecting contribution from the employers and paying the benefits to the insured person or their eligible family members.²²

Social insurance in Saudi Arabia is governed under the Social Insurance Law. Social insurance has been divided into the following branches:

Occupational Hazards Branch

Annuities Branch

The above insurance branches can be extended to include other kinds of benefits as per statutory methods.²³

4.2 Scope of Social Insurance Law [Article (4)]

This branch covers all Saudi workers irrespective of their sex.

The following points provide information regarding Article (4), which describes the scope of application of the two branches:

1) The Occupational Hazard branch covers all workers irrespective of their sex, nationality and age.

2) A worker covered by the Annuities branch should be under 60 years of age during his initial coverage under the branch.

If a person has re-engaged into employment at the age of 60 or above, the following will be applicable to him:

a. In case he is entitled to a pension for his earlier contribution and he is under 65 years of age, he may choose to contribute for the new period of employment or discontinue the contribution and avail himself of the pension.

b. The law will hold true, irrespective of change in employment and age, in case he is not entitled to the pension

3) For application of the above provisions, the following conditions should be met:

The worker has been employed by the employment contract

His employment is mainly performed within the Kingdom

He should be a Saudi national working abroad for an employer whose head office is located within Saudi Arabia

4) The Annuities Branch of insurance is applicable to the following set of people:

Saudi citizens engaged in liberal professions or who conduct commercial, industrial, agricultural or service activity, or who are tradesmen

It will also be applicable to Saudi nationals employed abroad and who have no work-related relation with any company with its headquarters in Saudi Arabia

The Occupational Hazards Branch of insurance may hold true for the aforementioned categories of people. It should, however, be approved by the board of directors, and followed by the decision of the Minister of Labour and Social Affairs.

5) The extent of insurance cover is governed by provisions of the respective branch of insurance branches.

6) The coverage may be extended to citizens not included in this article by an approval by the board of directors, followed by the decision of the Minister of Labour and Social Affairs.

The following individuals are exempted from insurance cover as per Article (5) of the Social Insurance Law:

Table 8: List of Individuals Exempted from the insurance cover

THE INDIVIDUALS EXEMPTED FROM SOCIAL INSURANCE COVER
Civil servants and members of the armed forces and the police
Foreign employees employed with foreign, international or diplomatic, or military missions
Citizens employed in agricultural, forestry or pastoral work
Citizens employed by state and semi-state bodies, and private establishments
Seamen, including the sea fishermen, people employed in the marine establishments and fishing companies
Domestic servants and artisans
Foreign nationals working in the Kingdom for a project/assignment lasting for less than three months
Employer’s family members working in their own family business, where the workforce constitutes only members of the family

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However, artisans and family members working in their own firm can avail themselves of the benefit provided by the Annuities Branch upon request. Also, workers employed in agriculture, forestry or pastoral work, seamen and domestic servants can avail themselves of the benefits provided under the social insurance law upon approval by the Minister of Labour and Social Affairs on the basis of approval granted by the Board of Directors and in accordance with the provisions of Article (6) of the Social Insurance Law.

Table 9: Insurance Branches and Contribution

INSURANCE BRANCH	CONTRIBUTION
Occupational Hazards Branch	2 percent of the contributory wages of the contributor Contribution is payable by the employer In case an employer refuses to abide by the instructions issued by the authority, he may be required to pay double contribution. A fixed amount of contribution is payable by persons covered under points (4) and (5) of Article (4) explained in section 4.1.1.
Annuities Branch	The contribution for a person covered under point (2) of Article (4) explained in section 4.1.1 shall be 18 percent of the contributory wage 9 percent of the contribution shall be paid by the employer The remaining 9 percent shall be payable by the employer The contribution for a person covered under point (4) of Article (4) explained in section 4.1.1 shall be 18 percent of the assumed wage The assumed wage is chosen by the contributor The entire contribution is payable by the contributor * The above contribution can be changed by a decision of the Council of Minsters on recommendations given by the Minister of Labour and Social Affairs based on the opinion given by the Board of Directors.

GOSI – Revenue and Financial Organisation

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The basis of calculating the contribution and the contributory wages can be accessed through Article (18) of the website GOSI.

4.3 Benefits as per the Branches of Insurance

Table 10: Benefits Provided to the Person Covered by the Branch of Insurance

INSURANCE BRANCH	BENEFITS
Occupational Hazards Branch	A contributor suffering from an injury at the workplace, as defined by the law, or his family members, are eligible for the following benefits: Medical care – As required, depending on the physical condition of the contributor Daily allowances – In case a person has become temporarily incapable of working Monthly benefit and lump sum compensation – For permanent total or partial disability due to the injury Monthly benefits – Provided to the family members of the injured Grant – Provided to the family of the injured person or the recipient of benefit in case of death due to injury
Annuities Branch	Retirement pension is provided on fulfilling the following conditions: The person is 60 years of age He has completed the minimum period of contribution of 120 months He has not ceased from being covered under the provisions of this law Retirement pension is provided if the following conditions are met: The person is less than 60 years of age He ceased to be covered under the provisions of this Law He has contributed for a minimum period of 300 months A female contributor can receive the payable pension if the following conditions are met: She leaves the activity covered under this law and is at least 55 years of age She has contributed for a period of 120 months Contributors who work in arduous or unhealthy occupations and are no longer covered under the provisions of this law can receive the pension payable to them if they have contributed for 120 months. Regulations shall specify such occupations, their employers and their pensionable age of early retirement. The organisation will pay a retirement pension to the contributor’s family if the contributor has been imprisoned. The contributor should have completed 120 months of contribution. The retirement pension shall be payable even if he is less than 60 years of age. Note: The contribution months shall be computed in accordance with the provisions of Article (47). The age of the contributor shall be determined as per the provisions of Article (48).

GOSI – THE BENEFITS

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5 Free Trade Zones in Saudi Arabia

5.1 TUSDEER²⁴

Saudi Trade & Export Development Company (TUSDEER) developed and operates the first free zone at Jeddah Islamic Sea Port, Saudi Arabia. TUSDEER entered into a ‘build, operate and transfer’ agreement with the Saudi Ports Authority to develop and operate one million square metres of land.

TUSDEER was established with the objective of becoming a world-class operator of the free zones by offering good services and facilities to customers and promoting and developing the re-export, export, import, transshipment and in-transit business in the country as well as worldwide.

5.1.1 Facilities Available at TUSDEER²⁵

The free zone provides the following facilities:

Customs duty-free empty lots: Empty lots of various sizes are available for lease which can be used as warehouses, specialised processing facilities or open area for keeping containers, cars and other heavy and light weight equipment.

Duty-free container storage yard: It can be used to store empty or filled containers and perform container services such as stuffing, shuffling and arranging cargo.

Customs duty-free general cargo storage yard: It can be used to store and re-export cargos to other countries or split for partial import and partial re-export.

Customs duty-free vehicle storage yard: It can be used to keep vehicles and heavy equipment for re-export and transit purposes.

Pre-built warehouses: These warehouses are available on lease and are equipped with facilities such as water, electricity and communication. They are available on lease. The warehouses can be used for storing imported goods, transshipping the goods to other destination or splitting the bill of lading.

5.1.2 Incentives for Using TUSDEER²⁶

The TUSDEER free trade zone provides the following opportunities to its users:

The area is 100 percent customs duty-free.

The facilities available at the port help customers reduce their demurrage or detention charges.

The zone can be used as a distribution hub.

It is an intermodal centre.

Since customers do not need to pay any customs charges for storage at the zone, goods can be re-exported at competitive prices.

It helps in saving money on the transportation cost and avoiding the drawbacks or deposits.

It provides opportunities for excellent cash flow management.

5.2 Economic Cities²⁷

Saudi Arabia has begun the construction of four economic cities in different regions—King Abdullah Economic City, Prince AbdulAziz bin Mousaed Economic City, Knowledge Economic City and Jazan Economic City. These economic cities will provide ‘greenfield’ opportunities to investors. They are being viewed as the metropolises planned for achieving the following objectives:

Promoting balanced regional development in the country

Diversifying the economy

Creating job opportunities

Increasing the country’s competitiveness

According to the Governor of the Saudi Arabian General Investment Authority (SAGIA), two more economic cities will be established in the country, bringing the total count to six. These economic cities are expected to contribute EUR 109 billion to the GDP by 2020. It is also expected that the cities will create about 1.3 million jobs and provide accommodation to about 4.8 million people by 2020.²⁸

The Government of Saudi Arabia created SAGIA in 2000 after the passage of the Foreign Investment Law. SAGIA operates as a nodal agency to promote investment in the country from both domestic and international entrepreneurs.²⁹

SAGIA is responsible for licensing investments in the economic cities. The agency provides all the required government services through its SMART Service Centre (SSC). The SSCs are located in the major cities of Saudi Arabia and provide more than 128 government services at one place.³⁰

More information about the SSCs can be obtained through the Economic Cities Agency. The relevant contact details of the agency are in Table 11 below:

Table 11: Contact Details of the Economic Cities Agency

CONTACT PERSON/PURPOSE	CONTACT DETAIL
General Enquiries	Email: ecinfo@sagia.gov.sa
Mr Hani Hafez (Western Region)	Email: hhafez@sagia.gov.sa Office : + 966 2 657 1580 Extension : 666
Mr Bader Al Fozan (Eastern & Central Region)	Email: bfozan@sagia.gov.sa Mobile: + 966 50 690 0071

SAGIA - Establishing a Business in Economic Cities

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5.2.1 Setting Up a Business in Economic Cities31

The following points provide a brief overview of the policies followed for setting up a business in the economic cities:

Both foreign investors and Saudi nationals are allowed to set up business in the economic cities.

Foreign investments licensed under the Foreign Investment Act may be in the form of an entity jointly owned by a national and a foreign investor or entities wholly owned by the foreign investor.

• SAGIA can issue business licences for capital investments except for the activities included in the Negative List, which can be accessed at SAGIA – Negative List.

The following types of legal entities can be established in the economic cities:

• Individual establishment
• Limited liability company
• Foreign company subsidiary/Branch of foreign company
• Corporate

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6 Opening a Bank Account in Saudi Arabia

Saudi Arabia has a stable banking industry. The Saudi Arabian Monetary Agency is the country’s central bank and acts as the supervisor of commercial banks.³² With an aim of establishing a monetary union with other Gulf Cooperation Council (GCC) nations, the country liberalised its licensing policy in 1999 by granting the branch licence to the Gulf International Bank of Bahrain. It gave branch licences to four more GCC region banks in 2002–04. Non-GCC region banks including Deutsche Bank, JP Morgan and BNP-Paribas were issued licenses in 2004. This marked the entry of foreign banks in the country.³³

In 2008, 19 commercial banks were operational in the country.³⁴ The total bank deposits during the first quarter of 2009 were EUR 180 billion, while total assets and liabilities of the commercial banks of Saudi Arabia stood at EUR 270 billion at the end of the first quarter of 2009. There were 1,430 commercial bank branches operating in Saudi Arabia in the first quarter of 2009.³⁵

Table 12: List of Major Saudi Banks

NAME OF BANK	WEBSITE
The National Commercial Bank	http://www.alahli.com
The Saudi British Bank	http://www.sabb.com/home/home_en.shtml
Saudi Investment Bank	http://www.saib.com.sa/english/home.aspx
Alinma Bank	http://www.alinma.com
Banque Saudi Fransi	http://www.alfransi.com.sa
Riyad Bank	http://www.riyadbank.com/index_en.html
Samba Financial Group (Samba)	http://www.samba.com/english/index_01_01_en.html
Saudi Hollandi Bank	http://www.shb.com.sa/vEnglish/default.asp
Al Rajhi Bank	http://www.alrajhibank.com.sa/pages/default.aspx
Arab National Bank	http://www.anb.com.sa/default.asp
Bank AlBilad	http://www.bankalbilad.com.sa/en/
Bank AlJazira	http://www.baj.com.sa/default.asp?lng=eng

SAMA - Saudi Banks

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6.1 Procedure for Opening a Bank Account

The requirements for opening a bank account in Saudi Arabia are outlined below:

6.1.1 Opening a Current Account³⁶

Retail, private and corporate customers can open a current account.

The following are the requirements for opening a current account:

• Original identity proof or Iqama (residence permit)
• Clear postal address is required when applying for a current account
• If a person is not a citizen of Saudi Arabia, he/she needs to provide a letter issued by the employer stating the date of starting employment

6.1.2 Opening a Saving Account³⁷

A saving account is generally opened by those persons who wish to save money for future use. Money in a saving account remains safe and the bank provides a reasonable return on the amount deposited. A saving account can be opened by both nationals and non-nationals of Saudi Arabia.

The following documents are required to open a saving account:

• A valid national identity proof, if the person is a Saudi national
• Iqama (residence permit), if the person is not a Saudi national
• Commercial registration certificate, if the account needs to be opened in the name of a company
• Postal address

6.1.3 Time Deposit³⁸

A time deposit is generally made to keep surplus cash deposited with the bank. The bank provides a competitive interest rate on the money deposited. A time deposit account can be opened by expatriates and nationals of Saudi Arabia. There is a minimum balance required for a time deposit account, for instance, the minimum deposit required in Riyad Bank is EUR 9,035 or a sum equivalent to the deposits of one month or more.

The following documents are required to open a time deposit account:

• Original national identity proof in case of Saudi nationals
• Iqama (residence permit) for non-Saudi nationals
• Commercial registration certificate, if the account needs to be opened in the name of a company
• Postal address

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7 Recruitment of Local Staff

The labour market in Saudi Arabia is governed by the Ministry of Labour. In 2008, the Ministry of Labour initiated several steps to create job opportunities and sustain the recruitment of non- Saudi workers. The ministry awards the ‘Diamond Prize’ to private sector companies for hiring more national workers. In 2008, the unemployment rate in the Kingdom was 9.8 percent, according to manpower research conducted by the Central Department of Statistics and Information.³⁹

Saudi Arabia has numerous recruitment agencies and consultants who play a significant role in hiring staff in the country. Private recruitment agencies from developed countries such as the UK and USA, provide recruitment services for executive and managerial positions in Saudi Arabia, while recruitment agencies from Asian nations such as India, the Philippines, Sri Lanka, Pakistan and Korea provide recruitment services for manual labourers required in Saudi Arabia.⁴⁰

The following sections provide a brief overview of the labour laws and recruitment agencies in Saudi Arabia.

7.1 Brief Overview of Labour Laws

The labour law of Saudi Arabia is divided into 16 parts, which are then subdivided into various chapters. The major constituents of each part are described in the table below:

Table 13: Saudi Arabia Labour Law

NAME OF THE PART COVERED	NAME OF THE CHAPTERS	MAJOR RULES COVERED UNDER THE CHAPTER
Definitions and general provisions	Definitions General provisions	Definition of terms such as original and temporary work used in the law General provisions regarding person and type of employment covered by the law and the person exempted from the scope of the law
Organisation of recruitment	Employment units Employment of the disabled Private offices for recruitment of citizens and private offices for recruitment from abroad	The functions of the employment unit set up by the government; employment units help to inform Saudi nationals of various job opportunities in the country. Rules relating to the employment of disabled persons Regulations governing activities of the natural person or corporate who hire employees from Saudi Arabia or other nations
Employment of non-Saudis	-	As per the law, employment of a non-Saudi person has to be approved by the Ministry of Labour and the person employed should have obtained a work permit.
Training and qualification	Training and qualification of the employer’s workers Qualification and training contract of workers other than the employer	As per the law, an employer has to train his Saudi employees to enhance their technical, administrative and vocational skills, which will help in replacing the non-Saudi workers. An employer employing 50 or more workers has to train the Saudi workers equal to at least 6 percent of the total workers per year.
Work relations	Work contract Duties and disciplinary rules Termination of work contract End-of-service award	Work contract and its contents Duties of the employer and the employee toward each other Conditions under which a work contract can be terminated Computation of the end of service award payable to the employee after termination of employment
Work conditions and circumstances	Wages Working hours Rest periods and weekly rest days Leaves	Minimum wages payable to the workers The permissible deductions made from an employee’s salary The maximum permissible work hours for an employee Rules relating to the rest hours available to the employee The number of paid leave allowed to an employee
Part-time work	-	Major rights and obligations of a part-time employee
Protection against occupational hazards, major industrial accidents and work injuries, and health and social services	Protection against occupational hazards Protection against critical industrial accidents Work injuries Medical and social services	Duties of the employer to ensure safety of the worker Obligations of the employee to work safely Safety measures to be taken by the firms considered ‘high risk’ to avoid hazardous accidents Obligations of the employer if the employee suffers from any work injury Necessity of provision for first aid medical services and physicians at the workplace Provision for meal, accommodation and transportation if the work place is located at a distant location not served by the means of transportation
Employment of women		The jobs restricted for female workers include those in a hazardous industry. Maternity leave granted to a female, etc.
Employment of minors		As per the law, a person below 15 years of age may not be employed or allowed to enter workplaces. Industries restricted for the minors Obligations of the employer hiring minors to work
Marine work contract		The information to be included in a work contract of marine workers The legal requirements for becoming a marine worker
Working in mines and quarries		Person suitable for working in a mine or quarry Work conditions in a mine or quarry
Work inspection		Duties and power of the work inspector Duties of the employer and employee of the work site or workplace which is being inspected
Commissions for settlement of labour disputes		The commissions designated for settlement of labour disputes include Preliminary Commissions for Settlement of Disputes and the High Commission for Settlement of Disputes. The rights of the preliminary and high commissions for settlement of disputes, rules relating to filing of cases to the commissions, etc.
Punishments		The fine payable by a person for violating the rules and regulation specified by the law
Concluding provisions		The Labour Minister issued decisions and regulations necessary for the implementation of this law within a specified period of 180 days from the date on which the law became effective The law was published in the official gazette and became effective 180 days after its publication

Sagia - Labour Law - September 2005

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7.2 Major Recruitment Agencies and Websites

Table 2 shows some of the recruitment agencies operating in Saudi Arabia and their websites.

Table 14: Recruitment Agencies and their Websites

RECRUITMENT AGENCIES	WEBSITES
Ministry of Labour – Recruitment Service	http://www.mol.gov.sa/securessl/login.aspx
Habsons Jobsup Ltd	http://www.habsons.net
ArabRec.Com	http://www.saudirec.com
HEADHUNTING AGENCIES	WEBSITES
Adroyts Executive Search	http://adroyts.com
Executive Recruitment	http://www.execsaudi.com
Executives on the Web	http://www.executivesontheweb.com/executive-and-management-jobs-insaudi- arabia
Tauzeef	http://www.tauzeef.com

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7.3 Average Salary

Table 3 provides information regarding the average salary in Saudi Arabia by the type of job, employer type, city, industry and major subject.

Table 15: Average Salary by Job in Saudi Arabia in 2009

JOB	AVARAGE SALARY (EUR)
Project Manager – Information Technology	32,311
Mechanical Engineer	16,957
Civil Engineer	13,172
Project Manager, Construction	32,707
Information Technology Manager	29,164
Electrical Engineer	16,490
Accountant	8,372

PayScale - Salary Survey for Country - Saudi Arabia - 2009

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Table 16: Average Salary by Employer Type in Saudi Arabia in 2009

EMPLOYER TYPE	AVARAGE SALARY (EUR)
Company	21,459
Hospital	16,994
Private Practice/Firm	21,173
Government State and Local	18,892
College/University	21,064
Contract	15,515
Other Organisation	16,491
Government – Federal	26,053
School/School District	10,906
Non-profit Organisation	20,971
Franchise	28,415
Self Employed	31,395
Foundation/Trust	30,729
Team	8,520

PayScale - Salary Survey for Country - Saudi Arabia - 2009

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Table 17: Average Salary by City in Saudi Arabia in 2009

CITY	AVARAGE SALARY (EUR)
Riyadh	23,183
Jeddah	20,748
Dammam	16,362
Khobar	20,446
Dubai	18,898
Mecca	12,472
Jedda (KSA)	20,972

PayScale - Salary Survey for Country - Saudi Arabia - 2009

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Table 18: Average Salary by Industry in Saudi Arabia in 2009

INDUSTRY	AVARAGE SALARY (EUR)
Construction	17,246
Information Technology Services	24,484
Oil and Gas	30,570
Banking	31,193
Telecommunications	31,217
Healthcare	19,898
Education, College/University	21,744

PayScale - Salary Survey for Country - Saudi Arabia - 2009

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Table 19: Average Salary by Degree/Major Subject in Saudi Arabia in 2009

DEGREE/MAJOR SUBJECT	AVARAGE SALARY (EUR)
Master of Business Administration (MBA)	31,272
Bachelor of Science (BS/BSc/SB), Computer Science (CS)	19,207
Bachelor of Science (BS/BSc/SB)	23,403
Bachelor of Engineering (BE/BEng)	19,747
Bachelor of Commerce	11,814
Bachelor’s Degree	25,560
Bachelor of Business Administration	25,835

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8 Taxation

8.1 Introduction⁴¹

The Department of Zakat and Income Tax administers and governs rules and regulations relating to taxation in Saudi Arabia. The country’s taxation system is divided into Zakat duty and taxes.

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8.2 Zakat Duty⁴²

The Zakat duty is levied on commercial goods and is collected from the following persons:

Individuals of Saudi Arabia or nationals of the Gulf Cooperative Council (GCC) region carrying out business in commercial goods in the country

All Saudi companies operating in the country

Companies owned by the nationals of the GCC carrying out business in the country

The share of Saudi individuals and nationals of the GCC in joint companies

The Zakat duty is charged on the Zakat base, which is computed by adding and charging certain items.

8.2.1 Items Added to Zakat Base⁴³

The following items are added to the Zakat base for calculating the Zakat Duty:

Capital

• Amount of capital held in the account for one year
• Increments to capital treated as capitalised equity items

Balances of all provisions and reserves held in the account for one year, except the depreciation provision

Retained profits

Amount of profit to be distributed by the company to its shareholders, provided they are in possession of the company

The year’s net profit adjusted for Zakat calculation

Loans used to finance the purchase of capital assets, investment for the entity and inventories (the loans used to finance inventories are added to the Zakat base only after the end of one year)

Owner or partner’s credit current account

• The lesser of the opening or closing balance is added to the Zakat base
• Where the increment in opening or closing balance results from closing the carried over profits or similar items, the higher of either the balances is taken

Subsidies received by the company

8.2.2 Items Charged to Zakat Base⁴⁴

The following items are charged to the Zakat base for calculating the Zakat duty:

Net value of fully paid fixed assets

• The value of assets should not exceed the total of the paid up capital, previous year’s carried over profits, reserves and provisions and credit current account.

Adjusted carried over losses

The balance of pre-incorporation or pre-establishment expense

The value of construction work or capital expansion

Investments, including long-term investments

• Short-term investments for reselling are also included in the Zakat base
• Investments made in the capital of a local company are deducted
• Long-term investments by banks in Saudi governmental bonds are deducted

Value of land and buildings owned by the entity

8.2.3 Zakat Base⁴⁵

The method for calculating the Zakat base of those who maintain their books and records can be accessed on the website DZIT – Determination of Zakat Base.

The criteria for calculating the Zakat base for the following individuals can be accessed on the website DZIT – Presumptive cases.

• Someone who does not maintain records and books
• Someone who filed returns after the expiry of the due dates, or
• Someone whose declaration books have not been accepted by the department because of shortfall in them

The Zakat duty is payable at the rate of 2.5 percent of the Zakat base.⁴⁶

8.2.4 Forms for Filing Return – Zakat Duty

Table 20: Forms and Due Dates for Filing Zakat Return

PERSON FILING THE RETURN	FORM	DUE DATE
The Zakat payer with books and records	Return No. 3	One month after the end of the financial year
The Zakat payer with no books and records	Return No. 4	One month after the end of the financial year adopted by them

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8.3 Income tax⁴⁷

The income tax is charged as per the new income tax law effective since July 2004.

The tax payers are divided into the following categories:

Tax on individuals

Corporate tax

Natural gas investment tax

Tax on non-residents

Each of these categories is discussed briefly in the following sections:

8.3.1 Tax on Individuals

The individuals include non-Saudi citizens and partnerships.

8.3.1.1 Tax on Individuals

The tax on individuals is applicable to non-Saudi citizens who satisfy any of the following conditions:

• The individual is a resident of Saudi Arabia and carries out business activity in the country
• The individual is a partner in a resident partnership of Saudi Arabia
• The person is acting as a general partner in a resident company whose liability is limited by the share capital

A non-Saudi resident carrying out business activity in Saudi Arabia has to pay taxes at a rate of 20 percent of the gross taxable income minus the allowed deductions.

8.3.1.2 Tax on partnership companies

The tax is chargeable on the partner in a partnership. The partner needs to pay taxes for the income from all the sources including the income from partnership.

The tax return needs to be filed within 60 days from the day of the end of the partnership’s tax year.

A limited partnership is taxable in the same manner as a limited company with shares.

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8.3.2 Corporate Income Tax

The following persons are subject to corporate income tax:

• A company resident in Saudi Arabia with non-Saudi shares (Investment funds are also considered capital companies)
• Non-Saudi limited partners in a limited partnership need to pay tax on their share in the net profits.

The rate of tax payable on the resident capital company is 20 percent of the gross taxable income minus the allowed deductions.

The tax needs to be filed in the DZIT form within 120 days of the end of the year as per the tax return.

8.3.3 Natural Gas Investment Tax

The natural gas investment tax is imposed on real and legal persons including both Saudis and those who receive treatment like Saudis and,

• Who make investments in natural gas, natural gas liquids and gas condensates activities

The natural gas investment tax is payable on the basis of the internal rate of return earned on the cumulative annual cash flows resulting from the investment made in the natural gas sector. The internal rate of return applies to the subsequent year.

The tax rate is progressive in the sense that it starts from 30 percent for an internal rate of return of 8 percent or less and reaches up to 85 percent for an internal rate of return of 20 percent or higher.

The method for calculating the annual cash flow can be accessed on the website DZIT - Natural Gas Investment Tax.

8.3.4 Tax on Non-residents

The following people are subject to tax under this category:

• A non-Saudi resident who carries out business in Saudi Arabia through a permanent establishment is subject to tax provisions applicable to resident companies.
• A person who is non-resident in Saudi Arabia including a legal entity which is non-resident in the country and does not have any permanent establishment in Saudi Arabia needs to pay taxes as per the withholding provisions on income from sources within the Kingdom (withholding provisions are explained in section 8.3.5).
  • Their income arising from the sale of technical or nontechnical interest in a resident capital company is taxable as per the general provisions of income tax law.

8.3.5 Withholding Tax

Residents who may or may not be the tax payers as per the income tax law and permanent establishment of the nonresident making payment to a non-resident from a source in the Kingdom, have to withhold tax from the amount paid to the non-resident.

The following income is derived from a source in the country:

Loan charge or proceeds of a loan

Insurance or the reinsurance premium

Income derived from technical or consulting services

Table 21: Withholding Tax Rates

TYPE OF PAYMENT	RATE OF AMOUNT WITHHELD (PERCENT)
Management fees	20
Royalties or proceeds, payments for services made to a sister or parent company	15
Payment for rent	5
Payment made for technical and consulting services	5
Payment for air tickets, air freight and marine freight	5
Payment for international telecommunications services	5
Dividends paid	5
Loan charges/Loan proceeds	5
Premium of insurance or reinsurance	5
Other payments	15

DZIT – Withholding Tax

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8.4 Tax Incentives

The following is the list of tax incentives offered by the government of Saudi Arabia to the establishments set up in Jazan City:⁴⁸

A one-time capital investment credit of 15 percent is granted, which can be carried forward up to 10 years.

Up to 50 percent of tax credit is granted on the wages and salaries paid to Saudi workers.

Up to 50 percent of tax credit is granted on the training cost of Saudi workers.

The following tax incentives are offered in the King Abdullah Economic City:⁴⁹

No personal income tax

The Corporate tax rate for foreign companies is 20 percent

The companies can carry forward their losses for an indefinite period

Exemption of import duty on specific raw materials used in the manufacturing process

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8.5 Agreements to Avoid Double Taxation⁵⁰

Saudi Arabia has signed agreements for avoidance of double taxation with the following nations:

Spain

Turkey

Republic of Korea

United Kingdom

Northern Ireland

South Africa

Austria

Pakistan

India

China

France

Saudi Arabia has also signed an agreement with the US government for exemption of tax on the income earned from international operation of a ship or aircraft.

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9 Appendix

TYPE OF ORGANISATION	ADDRESS	CONTACTS	WEBSITE
Ministry of Commerce	Ministry of Commerce and Industry Riyadh 11162 Kingdom of Saudi Arabia	Email: info@commerce.gov.sa Tel: + 966 1 4012222	http://www.commerce.gov.sa
Ministry of Labor and Social Affairs	Al Riyadh - Almursalat district - King Abdulaziz Road Saudi Arabia	Email: info@mol.gov.sa Tel: + 966 1 2006666	http://www.mol.gov.sa/ HomePage/home.html
Ministry of Interior Directorate General of Passports	Directorate General of Passports Riyadh - Al Farazdak - Zip Code: 11184 Saudi Arabia	Email: NA Tel: + 966 1 4771100	http://tickets.passport.gov.sa
Ministry of Foreign Affairs	Ministry of Foreign Affaires - Riyadh P.O. Box 55937 Postal Code 11544 Saudi Arabia	Email: info@mofa.gov.sa Tel: + 966 1 4055000	http://www.mofa.gov.sa
Ministry of Economy and Finance	Kingdom Of Saudi Arabia Riyadh Zipcode 11177 Saudi Arabia	Email: info@mof.gov.sa Tel: + 966 1 4050000	http://www.mof.gov.sa/en/ default.asp
Saudi Arabian Monetary Agency	Saudi Arabian Monetary Agency Al-Ma’ather P.O. Box 2992 Riyadh 11169 Saudi Arabia	Email: info@sama.gov.sa Tel: +966 1 4633000	http://www.sama.gov.sa
Capital Market Authority	Capital Market Authority Al Faisaliah Tower P.O. Box 220022 Riyadh 11311 Saudi Arabia	Email: info@cma.org.sa Tel: +966 1 2797190	http://www.cma.org.sa/cma_en/ default.aspx
Saudi Stock Exchange (Tadawul)	NCCI building, North Tower King Fahd Rd. P.O. Box 60612 Riyadh 11555 Kingdom of Saudi Arabia	Email: webinfo@tadawul.com.sa Tel: + 966 1 2189999	http://www.tadawul.com.sa/ wps/portal/HomeAr
Embassy of Belgium in Saudi Arabia	P.O. Box 94396 Riyadh 11693 Diplomatic Quarter	Email: Riyadh@diplobel.fed.be Tel: +966 1 4882888	http://www.diplomatie.be/riyadh/
SAGIA	Imam Saud Bin Abdulaziz Road (university road) P.O. Box 5927 Riyadh 11432 Kingdom of Saudi Arabia	Email: Education@sagia.gov.sa Tel: +966 1 2035555	http://sagia.gov.sa/english/

 

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10 Disclaimer

The Government of the Grand Duchy of Luxembourg declines all responsibility regarding the use of information featured in this document. The contents are provided for information purposes only. They contain information which is not necessarily complete, exhaustive, precise or up to date. In the event of discrepancies between the texts of this publication and the original documents, the original documents as officially published shall apply. This publication may refer to external sites over which the Government of the Grand Duchy of Luxembourg has no control and for which it declines all responsibility.

 

February 2010

 

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