OTHER SAUDI REGULATIONS    

PROFESSIONAL LICENSES

Accountants, auditors, lawyers and legal consultants, engineers and engineering consultants, translators and translation bureaus must be licensed by the Ministry of Commerce. For further details, contact the Department of Internal Trade, Ministry of Commerce.

TAX RATES

All enterprises must pay income tax or Zakat to the Directorate General of Zakat and Income Tax. There is no personal income tax in Saudi Arabia for either national or expatriate employees.

Zakat

Zakat is a form of religious tithe paid annually by Saudi and GCC companies and individuals engaged in trade in the Kingdom. The Zakat on trade activities is 2.5 percent on taxable capital.

Income Taxes for Foreign Enterprises

The taxable income of business enterprises following the tax holiday includes the profits of a foreign company and the share of non-Saudi sleeping partners in the net profits of partnership companies. The following tax rates apply:

The First SR 100,000                             25%
Between SR 100,001 and SR 500,000    35%
Between SR 500,001 and SR 1,000,000    40%
More than SR One Million                     45%

Companies formed under the provisions of the Foreign Capital Investment Act with participation of Saudi capital of not less than 25 percent are exempt for up to 10 years from payment of income tax. In 1993, this exemption was extended to cover profits arising from new capital investments in existing industrial joint venture projects.

Tax rates for self-employed expatriates

The maximum income exempted from tax is SR 6,000 annually. The successive rates on taxable profits are:

• 5 percent on the sum above the exempted income but not more than SR 16,000 annually.
• 20 percent on any sum more than SR 36,000 and less than SR 66,000 annually.
• 30 percent on any sum above SR 66,000 annually.

Taxes are collected annually, according to the Hijra year, unless the payer informs the Zakat and Income Tax Department in advance that he wants to pay according to their fiscal year.

FINANCIAL REPORTING AND AUDITING PROCEDURES AND REGULATIONS

All companies in Saudi Arabia formed in accordance with the Regulations for Companies are required to comply with Saudi Arabian generally accepted accounting principles. Such companies are required to have their financial statements audited by an auditor licensed in Saudi Arabia and to file annually with the Ministry of Commerce. The major accounting and auditing regulations are contained in the:

• Regulations for Companies
• Foreign Capital Investment Act
• Income Tax Regulations
• Saudi Arabian Auditing Standards
• Saudi Arabian Standards of General Presentation and Disclosure

The following accounting records must be maintained in Arabic and kept in the Kingdom:

• a daily journal.
• a general ledger.
• a register containing an inventory of the company’s assets, liabilities, and results for the year.

Accounting records maintained on computers are subject to the following additional requirements:

• the computer must be situated in Saudi Arabia.
• the auditors must authenticate a print-out at least quarterly.
• input and output procedures must be documented.

The Ministry of Commerce controls the accounting profession in Saudi Arabia. To guide the profession the Ministry has issued the Saudi Arabian Auditing Standards and the Saudi Arabian Standards of General Presentation and Disclosure. The Saudi Arabian Monetary Agency has issued additional accounting standards for banks. Although the standards for presentation and disclosure generally follow international accounting standards, the following accounting aspects are unique to Saudi Arabia:

• Assets cannot be revalued.
• Limited liability organizations other than banks cannot lend to their shareholders.
• When a limited liability organization accumulates losses in excess of 75 percent of its capital, it must hold a member’s meeting to discuss whether or not it should be dissolved.
• Although taxes on foreign partners and zakat on Saudi partners are assessed on individual shares of corporate or partnership profits and assets, they are nonetheless recorded as corporate expenses.

BANKRUPTCY REGULATIONS AND PROCEDURES

On January 2, 1996, the Council of Ministers approved the Code of the Settlement Preventing Bankruptcy. The Code, which went into effect on June 1, 1996, provides a framework in which a merchant debtor may reach a settlement with his creditors to avoid bankruptcy. The Code is not designed to prevent personal (nonbusiness-related) bankruptcy.

The Code allows debtors to seek conciliation with their creditors through committees to be set up at various local Chambers of Commerce and Industry in the Kingdom. If a settlement cannot be reached, or if the debtor so wishes, he may apply to the Board of Grievances and request it to call his creditors to offer them a settlement to avoid bankruptcy. However, such settlements must be approved by a majority of the creditors. When settlement proceedings begin, claims against the debtor are to be dropped. Prior to the enactment of the Code, bankruptcy proceedings were governed by the 1931 Commercial Court Regulations which do not provide for the reorganization of debts to avoid bankruptcy.

MINING CODE

In the case of industries using mineral resources (including quarry materials) and proposing to extract their own raw materials, concessions (excluding those for petroleum, natural gas, pearls, coral, and similar materials) must be obtained according to the 1973 Mining Code supervised and implemented by the Ministry of Petroleum and Mineral Resources.

Under this regulation, it is possible to obtain one or more of the following permissions and authorizations:

• exploration permits
• excavation licenses
• mining concessions
• authorization to build and operate refineries, mines, treatment plants and transportation facilities
• authorization of small mines
• quarry concessions or permits
• materials permits

An exploration permit is granted for an initial period of not more than two years and can be extended or renewed at the discretion of the Ministry. An excavation license is issued for a maximum area of 10,000 square kilometers and for a period not exceeding five years renewable for a period not exceeding four years. The holder of an excavation license has the sole right to obtain a license for the exploitation of mineral resources found during the validity of the exploration license.  The holder has surface and subsoil rights, and therefore is subject to a surface rental, at a rate per square kilometer that is fixed in the lease document. The rent shall be not less than SR 1,000 and not more than SR 10,000 per square kilometer per year or fraction of a year. The area allowed by a mining lease should not exceed 50 square kilometers.

Rights in small mines (area not exceeding 100 hectares) are granted under license by the Minister. They are issued only to Saudi nationals, for a period not exceeding 20 years, and can be renewed or extended for an additional 20 years.

Non-metallic minerals, rocks and other stones used only as raw materials in processing plants are considered essential for industrial plants. A permit for exploiting such materials is required, but the Ministry may vary the surface rentals to make an allowance for the extraction of low-value minerals.

An independent concession, separate and not connected with a mining concession, can be awarded to build and operate refineries and mineral treatment plants as included in this system, in addition to pipelines, railroads and other utilities necessary to transport those minerals, their products, and the materials used in their treatment.

The Minister of Petroleum and Mineral Resources can also give permission to collect and obtain stones and minerals for a limited period, not exceeding 2 years; the permission can be renewed for a period or periods not exceeding 10 years.

The Code provides, among other things, for the use of modern techniques in production as recognized by the mining industry, and for precautions against undue waste of natural resources. All equipment imported for the implementation of a license issued under the Mining Code is exempt from import and export duties. An income "tax holiday" of five years is granted by the Code to document holders, starting from the date of the sale of products or from the beginning of the fourth year after the issue of the lease, whichever occurs first. Unless the Ministry decides to negotiate with a document holder on the basis of profit-sharing, the document holder will pay income tax after the end of the "holiday" in accordance with the income tax laws in force.

BANKING CONTROL CODE

Banking in the Kingdom is regulated by the Saudi Arabian Monetary Agency (SAMA) under the 1966 Banking Control Code. Licenses for starting a banking business are issued by the Minister of Finance and National Economy. To ensure the liquidity and solvency of banks, ratios of deposit liabilities to paid-up capital and reserves, and the allocation of profits to build up reserves are regulated. Similarly, limits are placed on individual lending accounts. SAMA also maintains a statutory deposit from each bank, in compliance with the Code. Under the regulation, restrictions are placed on loans granted to business firms or companies in which the director of a bank has a direct interest. Any constitutional change in the bank can be brought about only after obtaining the approval of SAMA.

SAUDI ARABIA'S MEMBERSHIP IN INTERNATIONAL ORGANIZATIONS AND AGREEMENTS

African Development Bank (AfDB)
Arab Bank for Economic Development in Africa (ABEDA)
Arab Fund for Economic and Social Development (AFESD)
Arab Gulf Programme for United Nations Development Organization (AGFUND)
Arab Monetary Fund (AMF)
Economic and Social Commission for Western Asia (ESCWA)
Food and Agriculture Organization (FAO)
Group of 77
Gulf Cooperation Council (GCC)
International Atomic Energy Agency (IAEA)
International Bank for Reconstruction and Development (IBRD)
International Center for the Settlement of Investment Disputes (ICSID)
International Chamber of Commerce (ICC)
International Civil Aviation Organization (ICAO)
International Criminal Police Organization (INTERPOL)
International Development Association (IDA)
International Federation of Red Cross and Red Crescent
International Finance Corporation (IFC)
International Fund for Agricultural Development (IFAD)
International Labor Organization (ILO)
International Monetary Fund (IMF)
International Maritime Organization (IMO)
International Maritime Satellite Organization (INMARSAT)
International Olympic Committee (IOC)
International Organization for Standardization (ISO)
International Telecommunications Satellite Organization (INTELSAT)
International Telecommunication Union (ITU)
Islamic Development Bank (IDB)
League of Arab States
New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards
Nonaligned Movement (NAM)
Organization of American States (OAS) (observer)
Organization of Arab Petroleum Exporting Countries (OAPEC)
Organization of the Islamic Conference (OIC)
Organization of Petroleum Exporting Countries (OPEC)
United Nations (UN)
United Nations Conference on Trade and Development (UNCTAD)
United Nations Educational, Scientific, and Cultural Organization (UNESCO)
United Nations Industrial Development Organization (UNIDO)
Universal Copyright Convention (UCC)
Universal Postal Union (UPU)
World Customs Organization (WCO)
World Health Organization (WHO)
World Intellectual Property Organization (WIPO)
World Meteorological Organization (WMO)
World Trade Organization (WTO) -- Accession negotiations underway

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