The anti-concealment law has been a significant concern by foreign investors regarding their business future. It has been a part of the national program to combat commercial concealment by the Ministry of Commerce. Before, foreign entities used to partner with a Saudi national in concealed either to conduct business mutually or to benefit from his presence since non-Saudis were not allowed to engage in commercial activities solely. Lately, the Saudi government opened the country for international investors through the Ministry of Investment. The ministry offers several investment licenses to foreign companies, including those in the market earlier. In addition, the premium Iqama was introduced, giving non-Saudi individuals the privilege to operate their establishment or partner with a Saudi national. This article will provide some crucial tips on securing your investor license and complying with the anti-concealment law.
Anti-concealment correcting period
The Anti-concealment law poses severe penalties to any Saudi or non-Saudi practicing Tasattur. Violations can result in fines of up to five million riyals and imprisonment for five years. However, it also promised generous rewards for anyone whistleblowing or leading a business run by a concealing foreigner. While this raises significant concerns to current companies, especially those who already made their name in the market, the government offered a corrective period for non-Saudi companies to rectify their commercial status in exchange for avoiding liability.
To benefit from the correction period, several actions need to be settled as follows:
Agreement between parties
The Ministry of Commerce suggested three scenarios that determine the partnership between the foreigner and his Saudi partner.
- Enter a partnership with the Saudi party to be an official shareholder in the entity.
- Form a deal where the Saudi party transfers the entity ownership under the non-Saudi party.
- Upon failure of agreement between the parties, the Saudi party shall decide to dissolute, sell or maintain ownership of the business without the non-Saudi party.
Secure Investor License
As MISA license is reserved to foreign companies apart from individuals, the ministry listed Saudi presence and minimum capital on particular activities. On the other hand, it allowed entities looking to rectify their status within three years to meet the minimum capital requirement from requirements and exempted international presence in certain activities. Following key points of the investor license:
- The presence of a Saudi shareholder is required for some activities. For instance, any business involving communication, insurance, or real estate finance must have a Saudi partner with a %40 capital share. It applies as well to EPC contractors but with less amount as %25 capital share. However, most other activities, including services and trading, can be accepted with the entire foreign capital.
- There is no minimum capital amount required for most activities. However, some activities are excluded from that. For instance, if a trading company wants to legalize its status to be %100 foreign-owned, it must invest 30 million Riyals minimum capital. However, the amount will be reduced to 26.6 million Riyals If they want to keep a Saudi partner holding a %25 share. Other activities might be restricted with different amounts as well.
- Professional practices that engage in all kinds of consultancy are mandated to partner with a Saudi holding a professional license of the same field. International companies that perform engineering consultancy are not required to find a local partner if such a company has ten years of professional history and a prominent multinational presence.
- The company must be classified between medium and large-sized classes according to the national classification by Monshaat. In addition, the entity should be hiring at least 50 employees or achieving 40 million in revenue during the last year.
Summary
As we highlighted on most tips to comply with the anti-concealment law, making the right decisions would prevent unwanted scenarios. Finding a ground to partner with the Saudi party is crucial to avoid any possible complications. Second, maintain a medium-sized class in Monshaat and avoid practicing any of the restricted activities. Finally, secure a MISA license and maintain its validity.
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Author
Adnan Alhusaiyen
