the Provisions of Old and New Foreign Investment Laws A Comparison Between the Provisions of Old and New Foreign Investment Laws in Saudi Arabia

Date of Enactment of 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 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 The project must be in development with technical skills and expertise Old Law All fields are open for investment except those included in the negative list New Law

Period for taking a decision on the investment application Not Specified Old Law Maximum 30 days New Law

Possibility of obtaining more than one License Restricted, must be in the same activity Old Law The foreign investor may obtain more than one license in diverse activities New Law

Type of foreign investment Law favors joint ventures over 100% foreign owned projects Old Law 100% foreign owned projects are allowed by the new law in addition to joint ventures New Law

Incentives Old Law New Law Foreign capital enjoys the incentives offered to national capital only in the manufacturing industries Saudi share in ownership not less than 25% Old Law The foreign investment project enjoys the same incentives offered to the local projects New Law

Investment guarantees Not specified (although they are actually applied) No expropriation cases since 1957 Old Law 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

Old Law New Law Real Estate Ownership Ownership of real-estates not open to foreign investors Old 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 New Law

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 New 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% Old Law An initial decree has been issued reducing tax on profits to 30%; and allowing transfer of loses to coming years. New Law

Sponsorship Foreign investors must work under the sponsorship of a Saudi citizen Old Law The foreign investor and his non-Saudi staff shall be sponsored by the licensed investment project New Law