Foreign investments in Saudi Arabia (whether foreign-owned companies or branches of foreign entities) are licensed by the Ministry of Investment. In recent years, and in line with Vision 2030’s goal of increasing both foreign investment and private sector contributions to the economy, the Ministry of Investment has considerably streamlined the process for obtaining a foreign investment license. For example, the application process is now made online and for certain licenses it only requires submission to the Ministry of Investment of a shareholder’s financial statements and commercial registration (although the Ministry of Investment retains the discretion to request further documents).
In June 2017, the Ministry of Investment announced that five-year foreign investment licenses would be available to all new and existing investors, and that companies would be permitted to renew other licenses and permits, such as their Commercial Registration, for a similar term (previously, licenses had to be renewed annually). Although this may give foreign investors greater confidence to commit to Saudi Arabia, the actual term of the foreign investment license and commercial registration issued before renewal is required will be subject to the Ministry of Investment and MoCI’s discretion, and may ultimately be for a shorter period.
Demonstrating the strong government desire to encourage innovation in the Saudi economy, the Ministry of Investment has also introduced a new foreign investment license, designed for entrepreneurs that intend to establish pilot projects accredited by Saudi universities or business incubators.
Whilst a number of industries (for example, oil exploration, drilling, and production) remain prohibited from foreign investment, this so-called “negative list” has been reduced in recent years. In addition, a number of industries that were blocked to foreign investors, either due to other laws and regulations or the practices of certain ministries or governmental authorities, are now open to foreigners. These industries include, in particular, the healthcare and education sectors. Also, certain sectors have been opened up to 100% foreign investment for the first time. Most notably, (i) retail and wholesale trading businesses, and (ii) engineering consultancies both no longer require a Saudi shareholder, subject to meeting certain additional requirements set by the Ministry of Investment.
On incorporation, the foreign owner must make a foreign investment of at least SR30 million (USD $8 million). Additionally, during the five-year period after the foreign investment license is issued (unless there is a further investment of at least SR300 million (USD $80 million)), the investor must commit to:
Regardless of capital invested over five years, all companies must:
The foreign investor must:
As well as permitting full foreign investment in a wider range of sectors, the Ministry of Investment has also recently shown a willingness to facilitate common structures used in cross-border transactions that were previously prohibited by it, for example:
Z&Co. lawyers’ recent experience in foreign investment covers a wide range of sectors, including:
