Saudi Arabia - Joint Ventures/Licensing Saudi Arabia - JVs/Licensing
Under the current Foreign Investment Law, a foreign investor may either set up its own project or do so in association with a local investor (at present, only registered entities, and not individual investors, are being approved.). If the registered entity option is chosen, foreign investors most commonly structure their enterprise as a limited liability company. The minimum capital of an LLC with foreign participation is SAR 100,000 for most projects, SAR 1,000,000 for industrial projects, and SAR 25,000,000 (`$6,666,875) for agricultural projects. SAGIA may require higher or lower capital levels depending on its assessment of project requirements. The current law allows single member LLCs. After issuance of a SAGIA license, the LLC must be registered with the Ministry of Commerce and Investment Commercial Registry.
The one-member LLC may become the investment vehicle of choice in the future, given the relative simplicity and ease of registration and administration. LLCs can be owned 100 percent by foreign investors or have a mixed Saudi/foreign ownership. Joint-stock companies require authorization from both SAGIA and the Ministry of Commerce and Investment. In general, the provisions applicable to the administration of joint-stock companies are more detailed than those applicable to limited liability companies. The law requires the authorization of the Council of Ministers for the formation of any joint-stock companies for undertaking public sector projects that receive assistance from the state or include public sector institutions. Joint-stock banking companies also require authorization from the Council of Ministers.
The Investors Service Center (ISC) at SAGIA oversees all matters related to foreign investor licensing and registration. The ISC was intended as a one-stop shop to assist foreign investors and minimize lengthy procedures, though its record in achieving this goal has been mixed. Foreign companies’ profits are taxed at 20 percent of profits, and losses may generally be carried forward.
To manufacture products regulated by the Saudi Arabian Standards Organization (SASO), the Saudi authority for establishing product standards for imports and locally manufactured goods, SASO’s approval may be required. The Communication Information Technology Commission (CITC) has authority over imported telecommunications and IT products and services and has taken an increasingly proactive regulatory role. Recently the CITC has published various specifications relating to IT products and services. The Saudi Industrial Development Fund (SIDF) may be engaged to provide up to 50 percent financing for approved industrial projects with payback periods up to 15 years. Market intelligence is available to prospective investors through the SIDF.
Other Saudi Arabian Government entities that may be involved in the process of establishing a business presence in Saudi Arabia include: the Ministry of Foreign Affairs (visas); the Ministry of Interior (residence permits and industrial safety and security approvals); the Ministry of Labor (Saudi labor regulations and hiring quotas); the Royal Commission for Jubail and Yanbu (if the project is in those industrial cities); the General Organization for Social Insurance (social insurance and disability payments for Saudi employees); and the Technical and Vocational Training Corporation (training programs for Saudis).