A Comparison Betweenthe Provisions of Old and

New Foreign Investment Laws in Saudi Arabia

Date of Enactmentof Investment Law

Old Law : 1979

New Law : 2000

Number of Projects

Old Law 1609 Operating Joint Ventures with total finance amounting to US$ 50 billion (in 21 years)

New Law 1864 newly licensed projects with total finance amounting to US$ 13.71 billion (in 3 years)

Licensing Authorities

Old Law Foreign Investment Secretariat –

Ministry of Industry and Electricity

New Law Saudi Arabian General Investment

Authority (SAGIA)

Authorities Providing Services to Investors

Old Law Several Ministries and Government Agencies

New Law Saudi Arabian General Investment Authority (SAGIA) Investor’s Service Centers (One-Stop-Shop) which has representatives from nine investment related ministries

Investment fields open to foreign investors

Old Law The project must be in development

with technical skills and expertise

New Law All fields are open for investment except

those included in the negative list

Period for taking a decision on the investment application

Old Law Not Specified

New Law Maximum 30 days

Possibility of obtainingmore than one License

Old Law Restricted, must be in the same

activity

New Law The foreign investor may obtain more

than one license in diverse activities

Type of foreign investment

Old Law Law favors joint ventures over

100% foreign owned projects

New Law 100% foreign owned projects are

allowed by the new law in addition

to joint ventures

Incentives

Old Law Foreign capital enjoys the incentives

offered to national capital only in the

manufacturing industries

Saudi share in ownership not less than 25%

New Law The foreign investment project enjoys the

same incentives offered to the local projects

Investment guarantees

Old Law Not specified (although they are actually applied)

No expropriation cases since 1957

New Law The foreign investor shall have the right to transfer his share derived from selling his equity or profits out of the Kingdom, as well as any amounts required for the settlement of his contractual obligations, pertaining to the project.

Investments related to the foreign investor shall not be confiscated without a court order. They may not be subject to expropriation except for the public interest against an equitable compensation according to regulations

Real Estate Ownership

Old Law Ownership of real-estates not open to foreign

investors

New Law The foreign facility licensed under the Foreign Investment

Act shall be entitled to possess the required real-estates as

might be reasonable for practicing the licensed activity or

for the housing of all or some of the staff.

Non-Saudi national’s Real-Estate Regulation allows foreign

investment in real-estates worth SR 30 million or more

Penalties on violations

Old Law Cancellation of license or denying the company some incentives,

after receiving warning from the Ministry of Industry and

Electricity to correct the violation within a certain period.

The investor may appeal to the Board of Grievances within 30

days.

New Law Withholding all or part of the incentives offered to the foreign investor.

Imposing a financial fine not exceeding SR 500,000

Cancellation of the license in case of continuity of violation after a

written notification to rectify the violation within a certain period

specified by SAGIA

A petition against the penalizing resolutions may be brought before

the Board of Grievance according to its regulations

Tax Exemption

Old Law Industrial and agricultural projects are offered 10

years holiday and other projects 5 years, provided

that the local share forms 25% of the project capital

Tax on profits ranges between 20-45%

New Law An initial decree has been issued reducing tax on

profits to 30%; and allowing transfer of loses to

coming years.

Sponsorship

Old Law Foreign investors must work under

the sponsorship of a Saudi citizen

New Law The foreign investor and his non-

Saudi staff shall be sponsored by

the licensed investment project