SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
Foreign Exchange Regulations Saudi Arabia imposes minimal restrictions on foreign exchange transactions, allowing the free movement of funds under the following conditions: • Foreign investors can repatriate profits, dividends, and capital gains without prior approval, provided taxes are settled. • All foreign exchange transactions must comply with SAMA Regulations, which require documenta - tion for significant transfers to ensure transparency and mitigate illicit financial activities. Customs and Trade Regulations Import and export activities are governed by the GCC Common Customs Law under the ZATCA. Compa - nies must be registered with the ZATCA to import and export goods, comply with applicable regulations and account for payment of customs duties and import VAT. Importers may also be required to comply with Saudi Arabian technical standards issued by the Saudi Arabian Standards, Metrology, and Quality Organisa - tion (SASO) and Saudi Arabian Food and Drug Author - ity (SFDA). Saudi Arabia generally operates a two-tier tax system. The nature of taxation of a corporation is depend - ent upon the nationality and residency of its ultimate shareholders. Taxation Framework Resident companies owned by Saudi Arabian/GCC nationals are subject to zakat at approximately 2.5% on the higher of their annual net profits adjusted for zakat purposes, or the zakat base. Where a Saudi Ara - bian company is owned by non-Saudi Arabian/non- GCC national shareholders only, it is subject to corpo - rate income tax at a 20% rate applicable on the profits adjusted for corporate income tax purposes. Where a Saudi Arabian company has both Saudi Arabian/ GCC and non-Saudi Arabian/non-GCC shareholders, it is subject to both zakat and corporate income tax on a proportionate basis. Saudi Arabian branches of foreign companies are normally subject to 20% cor - 9. Tax 9.1 Taxation of Business Activities
strategic alignment, economic impact, and regulatory compliance. The considerations include: • Economic Contribution: FDI must align with Saudi Arabia’s Vision 2030, emphasising job creation, knowledge transfer, and diversification of the economy. • Sector-Specific Restrictions: Investments in restricted sectors require additional scrutiny. • Ownership Structure: MISA assesses whether the investment structure adheres to local laws, includ - ing the use of special purpose vehicles (SPVs) or JVs with Saudi Arabian partners. • Sensitive industry considerations are also evalu - ated. • Control and Influence: For partnerships and JVs, authorities evaluate whether the foreign investor will exercise control or decisive influence over the Saudi Arabian entity. Different analyses may apply for: • partnerships and JVs; • acquisitions by foreign government-affiliated enti - ties; and • non-controlling minority investments, with the latter often subject to less stringent review provided no significant control or influence is involved. 7.3 Remedies and Commitments See 6.3 Remedies and Commitments . 7.4 National Security Review Enforcement See 6.3 Remedies and Commitments . 8. Other Review/Approvals 8.1 Other Regimes Sanctions and Anti-Money Laundering (AML) Regimes Saudi Arabia enforces a robust anti-money laundering (AML) and anti-terrorism financing (CTF) framework, primarily governed by:
• the Anti-Money Laundering Law; • Regulations issued by SAMA; and • Regulations issued by the CMA.
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