Even as Saudi Arabia’s neighbor, the UAE is liberalizing its investment regime to attract more foreign direct investment, the Kingdom is determined to protect its local businesses from the encroachment of foreign companies. In August 2020, KSA issued the new Anti-Concealment Law, which increased the penalties on foreigners practicing unauthorized economic activities limited to Saudi nationals.
Under the 2004 Anti-Concealment Law, penalties were capped at SAR 1,000,000. The maximum penalty has now been raised to SAR 5,000,000 and the corresponding jail sentence has been increased to five years from two years. Foreign individuals and companies who may be in violation of the Anti-Concealment Law have until August 23rd to rectify their status. Those who successfully complete a rectification request during the grace period will receive the following benefits:
- Exemption from retro-active collection of unpaid income taxes.
- Exemption from the criminal penalties imposed on violators.
Saudis who assist foreigners to violate the Anti-Concealment Law are also subject to the applicable criminal penalties and can exempt themselves through rectifying their status. Rectification requests must be submitted to the Ministry of Commerce as part of the National Anti-Commercial Concealment Program.
- Conclusion of an agreement between a foreigner and a Saudi as a pre-requisite for registering the business in the foreigner’s name, with the ownership to be transferred after the regulatory requirements are met.
- The sale or dissolution of the commercial entity.
- The addition of a Saudi or a licensed foreign investor to the business and registration of the company with the investor.
- The foreigner can become a “Premium Resident” in accordance with the 2019 Premium Residency Law.
- The foreigner can leave the country and sign an affidavit waiving all financial rights in the enterprise.
- The foreigner complies with the legal requirements to become a partner in the business
Applicants whose requests are accepted will be notified by the Ministry of Commerce concerning any outstanding requirements and will have a 90-day period to comply. The initial period may be extended by a maximum of 180 additional days.