Who really owns a ‘Saudi’ business? Why the truth matters
The growth and diversification of the Saudi economy in cooperation with the private sector is one of the most important objectives of the government’s development plan. Increasing the profits generated by a successful economy strengthens all sectors and strata of society. However, one of the most damaging activities that discourage the growth of the economy is the crime of commercial concealment.
Commercial concealment is when a Saudi citizen partners with an expatriate resident to invest in or establish a business that the foreign resident is prohibited from engaging in, such as commercial, industrial or agricultural activities, brokering, mediation, banking, education or any activity not permitted by the foreign capital investment system or other regulations and laws. They do this so that the foreigner can escape the application of the foreign investment laws and the costs related to obtaining a license. The Saudi citizen agrees to the use of his name, then relaxes at home doing nothing while receiving a percentage of the business’s profits.
Unfortunately, this practice is widespread in the Kingdom. It is unfair and unjust. Income and profits that belong in Saudi Arabia are often siphoned abroad, depriving the Kingdom of valuable assets and negatively affecting the economy.
In an acknowledgment of this crime and the effort required to combat it, the Kingdom has issued the Anti-Commercial Concealment Law to curb this type of crime and to sanction the perpetrators. To implement oversight, the Ministry of Commerce and Investment appoints competent and well-trained staff to collect and verify evidence of any case. Those recording officers have the right to inspect suspected shops and businesses. There is a fine of up to SR100,000 ($26,663) for anyone who attempts to obstruct or mislead the mission of these recording officers.
The Public Prosecution is responsible for investigating and prosecuting those who break the Anti-Commercial Concealment Law. On conviction, offenders may be imprisoned for up to two years and fined up to SR1 million. In addition, details of the penalty may be published in the local press at the offender’s own expense.
These are not the only penalties. An offending business will be removed from the Commercial Register, the offender’s business license will be revoked and the business will be liquidated. The offender is also prohibited from practicing the same business activity for up to five years. Responsibility for any dues, fees, zakat and taxes is divided between the parties to the crime.
Finally, in an effort to promote the fight against commercial concealment, the Ministry of Commerce and Investment offers a financial reward to anyone who reports this crime of up to 30 percent of the fines imposed, provided the evidence supplied is admissible and leads to a conviction.
Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers.