Foreign Ownership Regulations in Saudi Arabia
In general, the processes for stakeholder consultation on regulatory issues remain opaque. While some government agencies proactively solicit feedback, others issue regulations without any prior consultation.
The Foreign Investment Act prohibits non-Saudi owners from owning real estate in the holy cities of Makkah and Madinah, except through inheritance or endowments. However, the law allows non-Saudis to rent property within these cities.
The Capital Market Authority
The Capital Market Authority (CMA) is responsible for regulating and developing the Saudi capital market. The authority also promotes the highest standards of transparency and disclosure in listed companies. In addition, it works to protect investors and dealers from illegal acts.
The authority issues licenses for foreign investment in the following sectors:
Wholesale and retail trading, banking and insurance, mining, and oil and gas. It also regulates the real estate sector. The government has a policy to boost local content in these sectors. Its goal is to create more private jobs for Saudi nationals.
The Real Estate General Authority
The Saudi Arabian Real Estate General Authority (REGA) is a government agency that regulates real estate investments and sales in the country. It is currently working to reform the Kingdom’s investment regulations, including making it easier for foreigners to purchase and own property. REGA has also reduced the time it takes to receive a license, decreased required customs documents and simplified its procedures.
In addition to regulating property ownership, REGA also has the responsibility of certifying budgets, balance sheets and auditor reports. It also prepares and submits periodic reports on the investment atmosphere in the Kingdom. The entity is also responsible for proposing operational plans and rules that improve the investment atmosphere and submits them to the Council.
Those who practice real estate brokerage in Saudi Arabia must have a REGA license and provide the required documentation, which includes copies of title deeds. Additionally, a security deposit is required for those who lease properties. This deposit is held by REGA in a special bank account and deductions are estimated based on the provisions of a set of rules. Failure to deliver this deposit could result in fines or even license revocation.
In recent years, the Saudi Arabian government has worked to improve its business climate, including reducing licensing and registration requirements. It has also implemented a variety of other improvements to encourage more foreign investment, including lowering minimum capital requirements and streamlining the approval process. Moreover, the Kingdom has lowered its foreign ownership limits in many sectors and eased restrictions on local content and labor policies.
The Ministry of Interior
During the last decade, Saudi Arabia has introduced several initiatives to facilitate investment in priority segments of its economy. These include the elevation of two Saudi authorities to full ministries and a series of events focused on attracting new investments. Combined with upcoming amendments to the foreign ownership law, these changes signal the Kingdom’s commitment to opening its economy to new opportunities.
Non-Saudis may own real estate that is necessary for their licensed activities and for housing their staff, provided they obtain a license from the Ministry of Interior. Additionally, non-Saudi expatriates enjoying normal legal residence status in the Kingdom are permitted to own properties deemed appropriate for their personal use.
The Ministry of Environment, Water, Agriculture and Mineral Resources has also opened up its sector to foreign investment, encouraging businesses to invest in environmentally friendly projects. The Kingdom is also expanding its infrastructure, investing in 18 mega-projects designed to improve livability and boost economic growth.
Moreover, the Ministry of Information and Communications (MISA) has made it easier to do business in the country by reducing license approval time from days to hours. It has also reduced required customs documents and launched an online “instant” license issuance and renewal service. Nevertheless, many investors still seek local representation to navigate the country’s bureaucratic licensing process. In addition, the MISA website provides detailed information on the investment process and offers support services to foreign investors.
The General Investment Authority
Although there are still a few concerns, Saudi Arabia’s foreign investment policy has become increasingly transparent and less restrictive. Investors are now permitted to hold a majority stake in companies listed on the Saudi stock market, and the CMA has gradually liberalized requirements for interested investors. Furthermore, non-Saudi investors can open commercial bank accounts and establish specialized investment funds. However, concerns remain over business predictability and transparency. The government’s increasing focus on domestic non-oil revenues has led to policies that could weaken the country’s investment climate, including increased fees for expatriate workers and “Saudization” quotas, which require certain businesses to employ a minimum number of Saudi employees.
Investors can invest in a variety of industries in Saudi Arabia, including oil and gas, banking, construction, and healthcare. They can either set up a joint venture with a local partner or establish a limited liability company. Joint ventures with local partners are the most common, and are often organized as limited liability partnerships. The minimum capital required for LLCs with foreign participation ranges from zero to $8 million.