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INDUSTRIAL LICENSING PROCEDURES
Licenses for establishing an industrial unit are granted according to one of the two following regulations:
All industrial projects owned by foreign or national capital or by joint ventures whose fixed capital exceeds SR1 million (excluding the value of land and holdings) must be licensed by the Ministry of Industry and Electricity. Investors planning to start an industrial project should submit an application to the Evaluation and Licensing of Industrial Projects Department stating the product and the production capacity, approximate capital, and proposed location. If the Department considers the project suitable, it will provide the applicant with a license application form. The investor must fill in the license application form with details of the economic feasibility of the project and return the form and the feasibility study to the Department, with copies of the identity cards of the project owners. For projects with foreign capital, a copy of the initial partnership contract should be attached with the documents.
Special units in both the Evaluation and Licensing of Industrial Projects Department and the Foreign Capital Investment Committee are responsible for evaluating applications. They submit their recommendations to the Minister of Industry and Electricity, who gives the final approval.
Projects with a fixed capital of less than SR1 million are not subject to the
industrial license system but should be recorded in the Commercial Register. For these
projects investors should obtain a registration form from the Ministry’s Evaluation
and Licensing of Industrial Projects Department. The investor must submit the form, along
with equipment invoices, to the Department. If the Department approves the registration,
it will contact the commercial registration office where the project is located and notify
the investor to contact the Registration Department to complete the registration
procedure. Bakeries, cold stores, ice factories, and cement-mixing projects can be
registered commercially, without an industrial license from the Ministry.
NATIONAL INDUSTRIES ENCOURAGEMENT ACT
The National Industries Encouragement Act was sanctioned by Royal Decree No. M/50 dated 23/12/1381 AH. Its articles apply to existing and new industries and include the following concessions:
1) Customs duty exemption on all imports for industrial establishments, including equipment, machinery, tools, spare parts, raw materials (primary or semi-manufactured), and packaging materials, including tins, bags and cylinders.
2) Provision of plots of land for the construction of factories and residences for laborers and personnel, at a nominal rent.
3) Support for local production by limiting imports to the Kingdom of commodities similar to those produced locally.
4) Extending financial aid to the industrial establishments.
5) Exempting local products from export duties and all other taxes.
Concessions 1 and 2 are awarded by the Minister of Industry and Electricity on the recommendation of the Technical Industrial Bureau in the Ministry. Concessions 3 and 4 are granted by the Council of Ministers on the recommendation of the Minister of Industry and Electricity. Concession 5 is governed by a Royal Decree based on the decree of the Council of Ministers. To receive these concessions, industrial establishments should meet the following conditions:
FOREIGN CAPITAL
INVESTMENT ACT
The Foreign Capital Investment Act covers currencies, financial and commercial papers, equipment, machinery, spare parts, raw materials, products, transportation means, patent rights, and trade marks, provided that they are officially registered and officially recognized. Foreign investments in the oil and mineral sectors are subject to a special act applied by the Ministry of Petroleum and Mineral Resources.
To enjoy the concessions allowed in the Foreign Capital Investment Act, foreign capital should meet three conditions:
The license, with all information and documents, and signed by the authorized official or his authorized representative, should be submitted to the office of the Foreign Capital Investment Committee, where it is registered and evaluated and referred to the committee along with any relevant evaluation.
The application should include information on the legal status of the applicant, the company and the products it plans to produce in the Kingdom, with information on the local competition, a description of the manufacturing process, and details of the equipment, machinery and raw materials, manpower requirements and plans for the training of Saudi labor and personnel, the value of the project, the economic feasibility study, the project cost and marketing plans.
The Foreign Capital Investment Committee is comprised of the Undersecretary for Industrial Affairs of the Ministry of Industry and Electricity, as Chairman, together with representatives of the Ministries of Planning, Finance and National Economy, Petroleum and Mineral Resources, Agriculture and Water, and Commerce. Among the committee’s functions are suggesting development projects, assessing investment applications, investigating complaints or disputes, recommending penalties for violators, and establishing rules for the implementation of the Act.
The Foreign Capital Investment Act grants foreign capital the same concessions as national capital under the National Industries Encouragement Act. It exempts industrial or agricultural projects with foreign capital from income and corporate taxes for ten years, and exempts other projects from these taxes for five years from the start of production, provided that the project has local equity participation of not less than 25 percent during the period of exemption. If the project was in existence before the issue of the Act, the exemptions will be applied.
The Industry and Electricity Minister can draw the attention of any of the licensed industrial establishments to violations of the provisions of the Act and require them to remedy the violation within a specified time. In case of non-compliance, the Minister may, on the recommendation of the Foreign Capital Investment Committee, withdraw the license or liquidate the establishment.
The owners of the establishment may appeal to the Board of Grievances against the penalty within 30 days from the date of notification, through the official channels.
DEVELOPMENT PROJECTS QUALIFYING FOR FOREIGN INVESTMENT
The Ministry of Industry and Electricity designates five categories of development projects as qualifying for foreign investment, as described below. However, other development projects may be accepted on the recommendation of the Foreign Capital Investment Committee.
Industrial Development:
Agricultural Development:
Health Development:
Services:
Contracting:
Industrial Works:
LICENSE APPLICATIONS FOR ESTABLISHING FOREIGN CAPITAL INVESTMENT PROJECTS
I. Submission of License Applications
A. Industrial Projects:
Investors who want to establish an investment project should briefly describe the nature of the proposed project, in terms of products, production capacity and investments, etc., to the Evaluation and Licensing of Industrial Projects Department of the Ministry of Industry and Electricity and enquire about the possibility of licensing the project.
If there is a possibility of issuing a license on the basis of the production capacity of existing factories and of market conditions, the potential investor will receive license application forms from the Evaluation and Licensing of Industrial Projects Department at the Ministry.
If a license is to be granted to a joint venture, the Saudi or the foreign partner, or his authorized representative should submit the license application form to the Secretariat of the Foreign Capital Investment Committee along with the following documents:
If the foreign partner is a company:
1) The partnership agreement, signed by all partners.
2) The license application form for the establishment of an industrial project, in Arabic, with another form in English if one of the partners is non-Arab. The form should be signed by the authorized applicant.
3) The resolution of the Board of Directors of the foreign company to invest or participate in the establishment of the project in the Kingdom to be attested by the concerned authorities. The resolution should mention the name and the nationality of the company’s representative as well as the name of the Saudi partner.
4) The project economic feasibility study and catalogues of production, machinery and equipment.
5) For special trademarks or patent rights, an attested certificate approving the use of industrial patent rights, as well as copies of the technical agreement if any.
6) An attested letter of a valid authorization to the applicant stating the authority of the applicant.
7) An attested registration certificate of the foreign company in the country of origin, issued by the authority that approved the company. The certificate should state the date of registration, with an Arabic translation of the certificate.
8) Attested documents stating the experience of the foreign company participating in the proposed project in manufacturing similar products and stating the date on which the company assumed its industrial activity.
9) If the foreign company participating in the project has no industrial experience and is affiliated with another company which does have experience, the following should be presented:
a) An attested certificate stating the relationship between the foreign company and the parent company.
b) An attested registration certificate of the parent company in its country of origin, issued by the authority which gave it the right to carry out its work, and bearing the registration date.
c) An attested certificate of the experience of the parent company in the manufacture of products similar to those of the proposed project.
d) An undertaking attested by the competent authority, including an undertaking by the parent company to extend technical assistance to the proposed project.
e) Budgets of the parent company for the last three years.
10) The final accounts and the general budgets of the foreign partner for the last three years.
11) The permanent addresses, phone, and fax numbers of the Saudi and foreign partners.
12) A copy of the Commercial Registration of the Saudi partner for the establishment, and copies of the identity cards of the individual Saudi partners.
13) An undertaking by the foreign partner confirming that it is not a partner in other companies in the Kingdom that have similar activities.
14) An undertaking by the principals to furnish the Ministry with the address of the project after its completion.
15) The initial consent of the Ministry of Information for printing and advertisement projects.
16) For lubrication oil blending projects, the initial consent of the Ministry of Petroleum.
If the foreign investor is an individual:
He shall present the documents listed in 1, 2, 4, 5, 6, 11, 13, 14, 15 and 16 above in addition to the following: certified copies of the individual’s curriculum vitae and diplomas translated into Arabic; a copy of the individual’s passport, residence permit if he is resident in the Kingdom, and a letter from his sponsor approving the transfer of sponsorship if the project is endorsed.
B. Transportation Projects:
Shipping projects mentioned in Article 5 of the ministerial resolution on development projects are available to foreign investors. Transportation projects require a license in accordance with the Foreign Capital Investment Act before the registration and formation of the company according to the Companies Act.
The foreign investor, in the case of a joint venture, or the Saudi partner or a duly authorized representative is to present the following documents:
1) The partnership agreement, signed by all partners.
2) A copy of the license application in Arabic (with a copy in English in the case of a foreign partner) along with a statement specifying the activity, the capital, each partner’s share and their nationalities.
3) An attested certificate with the authorization of the person who represented the application.
4) An attested certificate from the official authorities (annual reports can also be accepted) showing the activities of the foreign partner inside and outside the Kingdom, with a statement on the means of transport he owns and their value.
5) The resolution of the Board of Directors of the foreign partner to invest in the Kingdom and the appointment of an agent of the company in the Kingdom. The resolution should be approved by the concerned authorities.
6) An attested registration certificate of the foreign company participating in the project, in its country of origin.
7) The annual reports and general budgets of the foreign partner for the last three years.
8) A document stating the assistance and facilities to be extended by the parent company for the joint venture project.
9) The address of the foreign partner in his country of origin, the address of the Saudi partner in the Kingdom and the address of the proposed project.
10) Copies of the Commercial Registrations of the Saudi partners, in the case of companies and establishments, and identity cards in the case of individuals.
11) An attested certificate stating the date and place of manufacture of the project’s vessels, loads and any other statements (for shipping projects).
12) The economic feasibility study of the project in Arabic.
13) The consent of the Ministry of Communications (The Deputy Minister for Transportation Affairs) for the establishment of the project in the Kingdom.
14) An undertaking by the foreign partner company that neither it nor its branches or associate companies is participating in any project of similar activity in the Kingdom.
C. Services and Contracting Projects:
The Ministerial Resolution related to development projects, under the Foreign Capital Investment Act, states the types of projects related to the provision of services or contracting works that have foreign capital and can be licensed. All these projects require licenses according to the Foreign Capital Investment Act before formation and registration of the company according to the Companies Act. Companies licensed according to the Foreign Capital Investment Act that have been founded and registered for carrying out certain services or contracting works should obtain an amendment of the previous license given to them.
Foreign companies that do not hold licenses but have temporary registration from the Ministry of Commerce for carrying out a contract need a license under the Foreign Capital Investment Act to continue their work in the Kingdom on projects for the public or private sector.
In all cases above, the foreign investor, or the Saudi partner or their duly authorized representative, is to present the following documents.
If the foreign partner is a Company:
1) The partnership agreement signed by all partners.
2) The license application for the establishment of a contracting and services project in Arabic and another form in English if one of the partners is non-Arab. The forms should be signed by the authorized representative, and a preliminary feasibility and marketing study should be included.
3) The resolution of the Board of Directors of the foreign company to invest or participate in the establishment of the project in the Kingdom, including the name of the Saudi partner, and the name and nationality of the foreign company’s representative in a joint venture. The resolution should be approved by the competent authorities.
4) An attested letter of authorization supporting the applicant’s validity and stating the applicant’s authorities.
5) An attested statement mentioning projects carried out by the foreign partner inside and outside the Kingdom, their values, the dates of their execution, the name of clients, and a detailed description of the executed works.
6) An attested registration certificate of the foreign company in the country of origin issued by the authority that granted it the right to carry out its works. The certificate shall give the date of registration, with a translation in Arabic.
7) If the foreign company participating in the project is owned by another company, an attested certificate should be presented stating the relationship between the foreign partner and the parent company, with an undertaking by the parent company to extend technical assistance and facilities to the joint Saudi company. The parent company shall also present its budgets for the last three years.
8) The final accounts and the general budgets of the foreign partner for the last three years.
9) If the project is for maintenance, contracting or laboratories or any similar activity, a statement of the equipment for the establishment and its value should be presented.
10) The addresses of the foreign and Saudi partners and the address of the foreign partner in the Kingdom if any. If there is no permanent address, the applicant shall undertake to provide the Ministry with the permanent address upon its registration together with his signature on the prescribed form.
11) A copy of the Commercial Registration of the Saudi partner if it is an establishment or a company, and copies of identity cards if the Saudi partners are individuals.
12) An undertaking by the foreign partner that he is not a partner in any other company in the Kingdom that has similar activity.
13) The initial consent of the Ministry of Agriculture and Water for companies engaged in the drilling of water wells.
14) The consent of the Ministry of Petroleum and Mineral Resources for companies engaged in excavation, drilling of oil wells and mining.
15) The consent of the Ministry of Health for hospitals and clinics.
16) The consent of the Saudi Arabian Monetary Agency (SAMA) for banks.
17) On application for license by the fully owned branch of a foreign company in the Kingdom, the parent company shall undertake to be responsible for financial and non-financial obligations resulting from the activities of its branch in the Kingdom. The undertaking shall be duly approved by the official authorities.
If the foreign investor is an individual:
He shall present the documents mentioned in 1, 2, 4, 9, 10, 11, 12, 14, 15 and 16 in addition to the following:
1) A copy of diplomas and other educational certificates attested and translated into Arabic.
2) A copy of his passport and residence permit, if he is residing in the Kingdom, together with a letter of approval for the transfer of sponsorship if the project is endorsed.
II. Evaluation of Investment Projects and Issuing of Licenses
Industrial projects are evaluated by the Evaluation and Licensing of Industrial Projects Department in association with the Secretariat of the Foreign Capital Investment Committee. Other projects are evaluated by the Secretariat of the Foreign Capital Investment Committee after consulting other government organizations if necessary. The Secretariat of the Foreign Capital Investment Committee presents to the Committee the project application and the evaluation report for decision. The decision of the Committee is to be submitted to the Industry and Electricity Minister for approval.
The evaluation of the project and the issuing of the license takes between four and six weeks, provided all documentation is complete and depending on the nature of the project and schedules of sessions to be held by the Foreign Capital Investment Committee. The Secretariat of the Foreign Capital Investment Committee sends the license to the applicant with copies to:
If an application is rejected, the applicant may submit a petition to the Minister of Industry and Electricity. If the investor is requesting the amendment of a project license, he should submit an application to the Secretariat of the Foreign Capital Investment Committee within three months from the date of rejection or receipt of the license.
III. Project Procedure and Registration
The application for the foundation and registration of a company, under the Companies Act, or for the amendment of articles of association, if the company is in existence, should be submitted to the Ministry of Commerce with a copy of the license within a month from the date of the issue of the license.
Investors should also obtain a registration amendment certificate under the Commercial Registration and the Companies Act from the Administration of Companies or the Commercial Registration offices of the Ministry of Commerce in the Kingdom’s main cities.
Investors should take all necessary steps for the establishment of the project within six months from the date of issuance of the license as stated therein. Delay in taking these steps without acceptable reasons could cause the license to be canceled.
Applications for an extension of the period for the establishment of the project should be submitted to the office of the Secretariat of the Foreign Capital Investment Committee with supporting reasons. In addition, the following should be taken into consideration for industrial projects:
IV. Procedures for Obtaining Exemptions and Incentives
All owners of projects that apply for entry visas and resident permits for foreign laborers and personnel from the Ministry of Interior should seek the advice of the Foreign Capital Investment Committee on its resident permit (Iqama) and its renewal before applying to the Passports Department, and the advice of the Industrial Encouragement Department on the manpower needed by the industrial project before applying to the recruitment office at the Ministry of Interior.
Industrial projects requiring loans at concessionary terms from the Saudi Industrial Development Fund (SIDF), should submit applications, with the required details in the prescribed form and a copy of the license, to the SIDF. Industrial projects that require exemption from customs duties for the importation of machinery and equipment, and raw materials under the National Industries Encouragement Act should submit a request for each exemption to the Encouragement Department of the Ministry of Industry and Electricity. The owner of the industrial project should apply to the department before the arrival of the goods that he plans to import, giving a detailed description of imported items, names and addresses of sources, country of origin and the Saudi port through which they will arrive, number and dates of invoices showing the amounts of goods and their prices in foreign currency.
The applicant should attach ten copies (eight in Arabic) of the preliminary invoices for the imported goods stating specifications, quality and value. The applicant should also fill in a form undertaking to use the imports for industrial projects only.
AMENDMENTS TO INDUSTRIAL AND NON-INDUSTRIAL LICENSES
Principal Documents
Amendments Requiring Additional Documents
Ownership amendment (industrial and non-industrial):
Modification of Joint Venture Company’s Name and/or Statutory Status (industrial and non-industrial):
Opening Branches (non-industrial projects):
Opening Follow-up Offices (non-industrial):
Increasing/decreasing Capital (non-industrial):
Adding or Deleting an Activity (non-industrial):
Dissolving and Liquidating a Company (industrial and non-industrial):
Extending a Company (industrial):
Increasing production capacity, adding new products, opening a new branch
Opening Marketing Centers or Showrooms (industrial):
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