The new Investment Law of Saudi Arabia that was issued under Royal Decree No. (M/19) dated 16/01/1446H (corresponding to 22 July 2024) and was published in Umm AlQura, the Official Gazette of the Kingdom of Saudi Arabia on 12/02/1446H (corresponding to 16 August 2024) (the "Investment Law" or the "Law") came into effect on 13/08/1446H (corresponding to 12 February 2025). Implementing Regulations for the Investment Law (the "IRs") were issued under Ministerial Resolution number 1086 dated 08/08/1446H (corresponding to 7 February 2025) of the Minister of the Ministry of Investment (MISA) and were published in Umm AlQura on 27/10/1446H (corresponding to 25 April 2025). The Investment Law and the IRs replace the Foreign Investment Law issued under Royal Decree No. (M/1) dated 5/1/1421H (corresponding to 10 April 2000) and its implementing regulations issued pursuant to the resolution of the Board of Directors of the General Authority for Investment - the predecessor of MISA - No. (2/74) dated 12/05/1435H (corresponding to 13 March 2014).

Key takeaways

Following are key takeaways from the IRs:

• Rights of Investors: The IRs reaffirm and broaden existing provisions in the Foreign Investment Law, guaranteeing investors the right to free transfer of funds, including capital, profits, and proceeds from the sale or liquidation of investments, as well as fair and equitable treatment, including protection against indirect expropriation. The IRs also establish a basic principle of equal treatment of local and foreign investors under similar circumstances, subject to considerations of public order, and provide additional guarantees, including protection of intellectual property and trade secrets and facilitation of administrative procedures. The IRs require the government to provide necessary support to investors, including access to available information and statistical data.
• Investment Incentives: The IRs anticipate granting incentives for investment in certain sectors according to specific objectives and pre-announced eligibility and evaluation standards. The final IRs do not describe the types of incentives that would be offered but published drafts of the IRs have mentioned that they would potentially include financial incentives, tax and customs incentives, regulatory incentives, and subsidies.
• Registration: The foreign investment licensing process was replaced by a registration procedure. Foreign investors must register with MISA for each investment, while local investors have the option to do so. Investors will need to submit declarations prepared by MISA, confirming the validity of all provided information and documents. Registered investors must reconfirm these declarations to MISA annually.
  The registration process is thus far similar to the previous licensing process with some minor modifications.
• Excluded Activities: The IRs distinguish between two types of activities in which foreign investment may be excluded or made subject to conditions: "Prohibited Activities", which are not open to foreign investment without prior approval from the Permanent Ministerial Committee for Examination of Foreign Investments ("FDI Committee"), and "Restricted Activities", which foreign investors may engage in only after meeting certain conditions.
  The FDI Committee will publish and periodically update a list of Excluded Activities in the Investor Guide. Foreign investors are prohibited from engaging in any Excluded Activity without prior approval from the FDI Committee and completing the required registration process. To obtain approval, a foreign investor must submit an application to the FDI Committee through MISA. The FDI Committee will determine the specific requirements, conditions, and documents needed for each Excluded Activity, which will be published by MISA.
• Penalties: A new penalty regime has been introduced, which distinguishes between serious and less serious violations by taking into account the frequency of the violation, the size of the facility and the severity of the penalty. In the case of non-serious violations in particular the investor may avoid penalties by responding to a warning and rectifying the violation within a time period of 30 business days. Otherwise, the violator may be subject to a fine not exceeding SAR 300,000, which may be doubled in case of a repeat violation, and/or cancellation of registration. The list of non-serious violations are published and updated regularly through the Investor Guide.

Conclusion

The issuance and implementation of the Law and its IRs mark a significant shift in the Kingdom's approach to both local and foreign investments. By broadening the scope of application of the old foreign investment regime to include local investors as well and establishing a principle of equal treatment for all, the law aligns with Vision 2030's goal of diversifying the economy and making Saudi Arabia a more attractive destination for global investments.

The new regulations strengthen already robust protections for investors' rights, including the right to repatriate funds, while replacing the licensing process with a streamlined registration procedure aiming to simplify administrative processes and enhance transparency.

Moreover, the anticipated investment incentives and the possibility for foreign investors to engage in restricted activities on a case-by-case basis further demonstrate the Kingdom's commitment to fostering a supportive and dynamic investment environment which expands opportunities for foreign investment.

As the Law and IRs came into effect, close monitoring of their implementation will be essential to ensure that the intended benefits are fully realized and that any necessary adjustments are made promptly. We will provide updates as appropriate as further information is available, e.g., as to updates on the lists of Excluded Activities.

Should you require assistance regarding any investment related matters, please feel free to contact us.

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