6:21 AM - Friday 24 Jan 2020

Investment in K.S.A

Incentives for Investment in the Kingdom

There are many reasons to invest in strategic sectors of Saudi Arabia where their comparative advantages are high.
It is the heartbeat in the center of the Middle East and North Africa, who has a population of nearly 400 millions.
Saudi Arabia is ranked 23rd amongst the twenty-five largest economies in the world and first in the Middle East and North Africa, It also came in the 11th place amongst the 181 countries in the world in terms of ease of business practicing according to the "Business Practice Performance" report for 2010 issued by the IFC of the World Bank.
The Kingdom of Saudi Arabia is the largest free economic market in the Middle East. It holds 25% of the total Arab GDP, in addition to that, the Kingdom of Saudi Arabia has the largest oil reserves in the world (25%) and it provides energy for investment projects with the lowest prices on the level of all countries of the world, which makes the Kingdom the ideal destination for energy consuming projects, as well as a number of promising natural resources in mining.
Also, the geographical location of the Kingdom makes it an easy access to the markets of Europe, Asia and Africa, and the Saudi market has a high purchasing power as the local market is witnessing a continuous expansion.
It should be noted that the Kingdom is one of the fastest growing economies in the world, where it is expected that the individual share of the national income will increase to 33500 US Dollars by the year 2020 after it was 20,700 in 2007.
The Saudi Riyal is considered to be one of the most stable currencies in the world, where there was no significant change in its exchange value during the last three decades; The Saudi Riyal is considered one of the most stable currencies in the world, where there was no significant change in its exchange value during the last three decades; also, there are no restraints on the foreign currency exchange or on the capital and profits transference to abroad.
As for the inflation rates in Saudi Arabia, they are very low, and the Kingdom seeks to sign bilateral agreements with a number of countries regarding the promotion and protection of investment and preventing double taxation.

 

Tax Incentives for Foreign Investment

There are many reasons to invest in strategic sectors of Saudi Arabia where their comparative advantages are high.
It is the heartbeat in the center of the Middle East and North Africa, who has a population of nearly 400 millions.
Saudi Arabia is ranked 23rd amongst the twenty-five largest economies in the world and first in the Middle East and North Africa, It also came in the 11th place amongst the 181 countries in the world in terms of ease of business practicing according to the "Business Practice Performance" report for 2010 issued by the IFC of the World Bank.
The Kingdom of Saudi Arabia is the largest free economic market in the Middle East. It holds 25% of the total Arab GDP, in addition to that, the Kingdom of Saudi Arabia has the largest oil reserves in the world (25%) and it provides energy for investment projects with the lowest prices on the level of all countries of the world, which makes the Kingdom the ideal destination for energy consuming projects, as well as a number of promising natural resources in mining.
Also, the geographical location of the Kingdom makes it an easy access to the markets of Europe, Asia and Africa, and the Saudi market has a high purchasing power as the local market is witnessing a continuous expansion.
It should be noted that the Kingdom is one of the fastest growing economies in the world, where it is expected that the individual share of the national income will increase to 33500 US Dollars by the year 2020 after it was 20,700 in 2007.
The Saudi Riyal is considered to be one of the most stable currencies in the world, where there was no significant change in its exchange value during the last three decades; The Saudi Riyal is considered one of the most stable currencies in the world, where there was no significant change in its exchange value during the last three decades; also, there are no restraints on the foreign currency exchange or on the capital and profits transference to abroad.
As for the inflation rates in Saudi Arabia, they are very low, and the Kingdom seeks to sign bilateral agreements with a number of countries regarding the promotion and protection of investment and preventing double taxation.

 

Tax Incentives for Foreign Investment
The Saudi government has granted tax concessions for a number of less developed regions in the Kingdom; in order to attract more investments to it, and that will for a time span of ten years from the starting of any project.
The areas covered by the tax reductions are:

1. Hail
2. Jazan
3. Najran
4. Al-Baha
5. Al-Jawf
6. The Northern Border Area

All of these areas have industrial cities supervised by the “Modon”, and it has many of industrial opportunities as well as commercial, residential and services sectors opportunities.
Tax incentives include the following benefits:

• 50% discount on the annual training cost of Saudi manpower.
• 50% discount of the annual wages paid to the Saudi employees.
• Additional discounts given if the capital invested was more than one million Saudi riyals and if more than 5 Saudi employees were hired with annual contracts in jobs with a technical or administrative nature.
• Regulatory and Financial Incentives for Foreign Investment:
The investment environment in Saudi Arabia is distinguished by its continuous development; and that is a major attracting factor for foreign investment into the Kingdom.
The Saudi Supreme Economic Council, headed by the Custodian of the Two Holy Mosques King Abdullah, is responsible for formulating the economic policies and focusing on building an efficient national economy; and that includes supervising the foreign investment and encouraging it; the system has included a group of foreign investment regulatory incentives such as:
• Establishing the Saudi Arabian General Investment Authority (SAGIA) to be the authorizing body for issuing investment licenses to foreign investors and coordinating with other involved government agencies.
• Foreigners have 100% ownership over companies and territories.
• No restrictions on remittance of the capital.
• No taxes imposed on personal income, but foreign companies have to pay 20% of the yearly profit as taxes.
• Possibility of carrying forward losses in the balance sheet statement for unlimited time.
• The foreign investors shall have the right to benefit from the local and international specialized funding institutions, which include:

o Arab Fund for Economic and Social Development (AFESD) which participate in financing the development of economic and social projects in the Arab countries.
o Arab Monetary Fund: It works in enhaning the development of Arab financial markets and intra-regional trade of member states as well as provides advice to member states on the investment of its resources.
o Arab Trade Financing Program: It grants medium- term and long-term loans to individuals and trade institutions to support commercial exchange and financial transactions of the private sector.
o Arab Investment Guarantee Corp: It provides insurance coverage for investments and credits on exports among the Arab countries against commercial and non-commercial risks.
o Islamic Development Bank: it contributes to the investment capital projects, grants loans for productive projects and enterprises; and accepts deposits for the recruitment of financial resources in line with the provisions of Islamic Sharia.

• There are a number of financial incentives that support the national and foreign investments in the Kingdom, which include the following:

1. Human Resources Development Fund: It supports activities related to rehabilitation, training and employment of the Saudi labor force.
2. Preferential quota of natural gas.
3. Competitive prices for water, electricity and land services for commercial and industrial projects.
4. Financial grants for research and development in the King Abdullah University of Science and Technology (KAUST), and King Abdul Aziz City for Science and Technology (KACST).

• Other lending sources for industrial investments in the Kingdom:
• Saudi Industrial Development Fund: provides loans for industrial projects of up to 50% of the project capital.
• Guarantee Program to finance small and medium enterprises: It follows the Saudi Industrial Development Fund and aims to cover the risk rate of the banks in financing small and medium enterprises. The rate of guarantee is up to 75% of the value of the loan.
• Saudi Fund for Development: Provides assurance and export credit insurance services to help exporters. The policy covers 90% of credit value.
• Agricultural Development Fund, Saudi Credit and Saving Bank, local banks: They have financing programs on easy terms.
• Industrial Incentives in the Kingdom:

First: Industrial Lands:
The government provided industrial cities located in all regions of the Kingdom.
The Saudi Industrial Property Authority “MODON“ oversees twenty industrial cities, while the Royal Commission for Jubail and Yanbu oversees two cities on the coasts.
There are industrial zones supervised by the Economic Cities Authority, which was established recently.
The Saudi Industrial Property Authority “MODON” provides industrial lands at incentive rents starting from: 1 Saudi riyal/square meter per year, most of it is distinguished by the availability of infrastructure, supporting facilities, logistical services and its developmental and economical dimensions.
Second: Provide services at discounted rates:
All types of energy whether (electricity, gas, diesel, gasoline) are available in the industrial cities in addition to water provided at subsidized prices.
District cooling services are also provided in some cities, in addition to the logistical, residential and commercial services which are provided at competitive prices.
Some industrial cities are located close to the coastal or dry ports and all industrial cities in the kingdom are located in sites of economic benefits, near international or regional main roads.
The industry in the Kingdom in comparison to industry in other countries is quite different where the raw material and semi-manufactured material is provided to local plants and factories at discounted and competitive prices.
Third: The customs exemption:
According to protection and promotion regulation of the national industries, any industrial establishment is entitled to obtain a customs exemption, which is divided into three main types:

1. Raw Materials.
2. Machinery, machines and equipment.
3. Spare parts of machinery, machines and equipment.