The Executive Rules of the Foreign Investment Act
Article 1 :
For the purpose of implementing these Executive Rules the following terms and
expressions shall have the meanings indicated opposite thereto, unless the context requires otherwise :
The Council : The Supreme Economic Council
Board of Directors : The Board of Directors of the Saudi Arabian General
The Chairman of Board: The Chairman of Board of Directors of the Saudi Arabian
of Directors General Investment Authority.
The Governor: The Governor of the Saudi Arabian General Investment
The Authority: The General Investment Authority
Foreign Investor: A natural person who does not carry Saudi nationality or
a corporate body, if all of the partners thereof are not
Foreign Investment : Investment of Foreign Capital in an activity licensed
under this Act and these executive rules.
Foreign Capital : For purposes of this Act and rules, Foreign Capital shall
mean, but is not limited to, the following assets and
rights so long as they are held by a Foreign Investor.
1. Cash, securities and commercial papers.
2. Foreign Investment profits if reinvested to increase capital, expand existing investment entities or establish new ones.
3. Machinery, equipment, fixtures, spare-parts, means of transport and production requirements related to the investment.
4. Intangible rights such as licenses, intellectual property rights, technical know-how, administrative skills and production techniques.
The Act : The Foreign Investment Act
Products Facilities : Projects for the production of industrial and
agricultural products (crops and livestock).
Service Facilities : Service and contracting projects.
The Rules : The executive rules of Foreign Investment Act.
The Center :
No. (9) of the Authority Act.
Second: The Fields of Investment
The Authority is authorized to issue a license for foreign capital investment in the Kingdom for any investment activity whether permanent or temporary with the exception of the activities excluded under the third article of the Act.
The Board of Director shall periodically review the list of activities excluded from foreign investment in order to decrease them and submit them to the Council to consider approving them.
Foreign Investments licensed under the provisions of this Act and these executive rules may be in either of the following forms:
1- Entities jointly owned by a national and a foreign investor.
2- Entities wholly owned by a foreign investor.
Foreign Investment projects shall enjoy all the benefits, incentives and guarantees extended to national projects, which are for example :
1. The incentives stipulated in the protection and promotion of national industries Act issued by the Royal decree No. 50 dated 23.12.1381 H.
2. To own properties required to carry out the licensed activity or for his residence and his staff housing according to the provisions of the Non –Saudis Real Estate Acquisition and Investment Act issued by the Royal decree No. M/15 dated 17.04.1421 H.
3. The benefits ensuing from agreements of avoiding double taxation and agreements of promotion and protection of Investment which are signed by the Kingdom.
4. Prohibition of any confiscation of investment wholly or partly without a court order or subjecting them to expropriation wholly or partly except for the public interest and against fair compensation.
5. The foreign investment is entitled to repatriate his share that is derived from the sale of his equity, from surplus of liquidation or the profits generated by the entity and to dispose of it by any legal obligations. He is also entitled to transfer required amounts to fulfill any contractual obligations in respect of the project.
6. The shares may freely move among partners and others.
7. The licensed entity is entitled to sponsor the foreign investor and his non–Saudi staff.
8. The licensed entity is entitled to obtain industrial loans in accordance with the provisions of Industrial Development Fund.
9. The losses incurred by the entity may me carried forward to the following years and will not be calculated at tax settlement of the years during which the entity reaps profits.
Fourth: Licensing Conditions and Criteria
The conditions for granting a Foreign Investment license by the Authority shall include the following:
1. The investment activity to be licensed should not be in the list of excluded activities, and the activity has to be within the Authority’s power to license.
Product standards and production processes shall be
approved under laws prevailing in the Kingdom, or in the absence of such laws,
the laws of the European Union or the laws of the
3. a) The amount of capital invested shall not be less than twenty five million Saudi Riyals for agricultural entities.
b) The amount of capital invested shall not be less than five million Saudi riyals for industrial entities.
c) The amount of capital invested shall not be less than two million Saudi riyals for other entities according to detailed criteria and rules laid down by Board of Directors.
The Board of Directors may reduce the minimum invested capital in projects established in areas specified by it or in projects which require high technical experiences or prepared for export.
4. The foreign investment must not have been convicted finally for substantial violations of the provisions of this Act.
5. The foreign investor must not have been previously convicted of financial or commercial violations whether in the Kingdom or in other countries.
6. The grant of a license shall not result in the breach of any international or regional agreements to which the Kingdom is a party.
The foreign investor may obtain more than one license to practice the same activity or different activities according to the following measures:
1. The conditions set forth under Article (6) of these Rules must be satisfied.
2. Licensing applications to practice the same activity submitted by natural or moral persons shall be dealt as expansion of their established projects.
3. The Board of Directors will reconsider these measures periodically or when necessary.
The foreign investor may purchase local or foreign investment entities or shares thereof provided the foreign investor satisfies the conditions set forth in article (5) and article (6) of these rules.
Fifth: Licensing Procedures
The authority shall prepare an investment guide containing a description of how to obtain permanent and temporary licenses, their amendments, the forms and the documents to be fulfilled before obtaining the licenses and the information required by the investor. The guide shall further contain the offered incentives, benefits and guarantees to be enjoyed by the foreign investor and the guide also contains substantial information about the following:
1. Foreign investment Act, its rules and supplementary decisions.
2. The statute for the General Investment Authority and its executive rules.
3. The Non-Saudis Real Estate Acquisition and Investment Act
4. National Industries Protection and Promotion Act.
5. Labor and Workmen Act and social insurance Act.
6. Zakat, tax and customs Acts.
7. Legal Sharia procedures Act.
8. Penal procedures Act.
9. Legal profession Act.
10. Companies Acts (commercial register, trade fraud, banks monitoring).
11. Intellectual property protection Acts (Trade Marks Act, Copyrights Protection Act, Patents Act).
12. Residence act :
The guide shall also contain special sections on the customs and traditions observed in the Kingdom and shall be updated regularly.
The Foreign Capital Investment application shall be submitted to the Applications Reception Unit of the Center, using the designated form. The application must contain all the necessary information; satisfy all documentation requirements cited therein and be signed by the applicant or his duly authorized representative. The center shall notify the license applicant by a written or electronic receipt note including the number of application record and its date.
The Authority may accept licensing applications and documents which reach in complete forms through mail or E-mail or fax and issue the licensing decision provided that it will not be delivered to the applicant only after getting the original documents when necessary.
Decisions on submitted applications shall be made in accordance with the provisions indicated in these rules and resolutions issued by the Board of Directors. The Governor, or his assigned delegate, shall sign the licensing decisions within thirty days. National holidays shall be excluded from the mentioned period.
The Center shall notify the investor, either by hand delivery or by registered mail or by E-mail or any other means, of the final decision issued with respect to his application.
Article 14 :
If the Authority rejected the license application or its amendment, its rejection shall be justified and the foreign investor may object the rejection decision before the Board of Directors within thirty days effective from the date on which he is notified of the rejection decision.
The Board of Directors shall consider the objection and make a decision on it within thirty days from the date of its submittal and if its decision was to reject, the license applicant shall have the right to challenge the rejection decision before the Board of Grievances.
Sixth: Obligations of the Foreign Investor
The licensed investor shall commence the process and undertake the steps required for setting up the entity in accordance with the time schedule the investor submits to the Authority. The Authority shall, if the investor shows adequate reasons for delays in the implementation procedures for the entity according to schedule, extend the period specified in the schedule, but such extensions shall not exceed one year in total. The said extension shall not exceed one year unless a decision to that effect is made by the Board of Directors.
In cases, that the Authority not approves the extension requests specified by the time table and if the investor is found not to be diligent after the extension, the Board of Directors may then revoke the license finally. An investor whose license is revoked under this Article shall bear the consequences of revocation.
Licensed entities must abide by the conditions and primary objectives upon which the licenses are issued. No modifications shall be made to the entities unless approved by the Authority.
Owners of licensed entities shall adopt an approved system of accounting and an approved budget for their entities by one of the authorized accounting offices and upon request shall provide the Authority with statistics or information in respect of their entities.
Authority officials, empowered by a written mandate by the governor or his representative, shall have the right to monitor the implementation of the provisions of the Act and these Rules. For this purpose, they have the right to examine records and all documents relating to the investment activity and shall pinpoint violations and submit necessary reports to the governor. The assigned officials shall maintain the confidentiality of the information and documents they examine.
The Board of Director shall issue a list of violations and penalties pertaining to the violations of provisions of the Act , this list , the licensing conditions, rules of their implementation and implementing the penalties therein.
The authority shall notify the Foreign Investor in writing regarding any violation of the provisions of this Act and its rules or of licensing conditions and shall allow a suitable period of time specified in the list of violations and penalties to correct the violation. If the Foreign Investor fails to correct the violation he shall be subject to any of the penalties provided for in the list of violations and penalties.
The Board of Directors shall form a committee consisting of at least three members, one of whom shall be a legal counselor and shall develop rules and procedures for the functioning of the committee. The responsibilities of the committee shall be to review violations of the Act provisions and its executive rules and the licensing conditions .The committee shall hear the parties accused thereof, to consider their defenses and to suggest what it sees according to what specified by the Act and the list of violations and penalties. The board of Directors shall render the penalty decision.
The investor with whose regard the penalty decision is issued according to Article 23 may object the rejection decision before the Board of Directors within thirty days effective from the date on which he is notified of the rejection decision.
The Board of Directors shall consider the objection and make a decision on it within thirty days from the date of its submittal and if it is decided to confirm the penalty the license applicant shall have the right to challenge the rejection decision before the Board of Grievances within 60 days effective from the date on which he was notified of the decision.
Eighth: Disputes Settlement Committee
The Board of Directors shall form, under Article 13, paragraph 2 of the Act, a committee composed of at least a chairman and two members called (Investment Disputes Settlement Committee) to consider the disputes arising between the Foreign Investor and his Saudi partners in respect of a licensed investment under this Act. The committee shall work to settle the dispute amicably. In case an amicable settlement could not be reached, the dispute shall be settled finally through arbitration according to the Arbitration Act issued by the Royal decree No. (46) dated 12.7.1403 H. and its executive rules. This committee is considered the competent body to consider the dispute as stipulated in the Arbitration Act.
LAW OF THE GENERAL INVESTMENT AUTHORITY
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