RIYADH, 25 August — Saudi Arabian General Investment Authority (SAGIA) has clarified that its recent amendment to the "Executive Rules of the Foreign Investment Act" was intended to create a business-friendly environment for the investors by strengthening the legal framework, particularly in relation to property ownership, parity with national companies and avoidance of double taxation.
The new executive rules replace the ones promulgated with the new Foreign Investment Act of April, 2000, it said in a statement yesterday. "The original 24 articles of the rules are being replaced with 26 new articles, adding emphasis on some provisions, simplifying the definition of procedures, and including the validation of e-mail and online applications.
Summing up the major changes introduced through the amendment, it said that an important amendment to Article 1 of the rules would enable foreigners to invest outside their own companies, if and when a more liberal capital law is introduced in the Kingdom. "The new rules will also make SAGIA the sole authority to issue licenses to new projects regardless of the sector."
Among the other objectives of the amendment are: SAGIA Board of Directors (under amended Article 3 of the rules) will periodically review the negative list with the express intent of opening up more sectors for foreign investment; the ownership norms have been given additional weight by separating them in Article No.4. Finally, it is pointed out that through Article 5 of the new rules SAGIA has sought to clarify and define the foreign investors’ parity with national industries, right to own property in Saudi Arabia , the benefits of avoiding double taxation, and relating them to specific laws and agreements.
It also facilitates free movement of shares between partners and others and clarifies that the losses carried forward will be written off at the time of the next settlement when the company begins to make a profit.
The statement said that through Article 6 of the new rules, SAGIA has sent a signal that it will closely monitor projects worth less than SR 2 million to prevent malpractices. Another significant amendment (Article 7 of the new rules) will enable foreign investors to obtain more than one license for the same business.
It said a new article (21) has been added to enable the SAGIA board to issue a list of violation and penalties. Articles 24 and 25 seek to clarify the appeal provisions related to possible violations of the law and the rules and penalties.
The new provisions will enable the foreign investor to appeal to the board of directors, and to challenge the board’s decision at a board of grievances.
Article 26 stipulates that if the Investment Disputes Settlement Committee fails to resolve a dispute, the case shall be settled through arbitration according to the Arbitration Act.
Other amendments are related to procedural matters. The full text of the Executive Rules can be accessed at www.sagia.org under "Regulation of the Foreign Investment Act," it adds.
