Investment country factsheet · Middle East / Gulf
Legal & tax framework for investment — 2026 edition
Series: UGGC Africa country factsheets — country-by-country guidance for investing in North Africa and the Gulf.
Saudi Arabia has rebuilt its business law in three years: a new Companies Law in force since 19 January 2023, the first codification of civil and contract law on 16 December 2023, and the replacement in February 2025 of the 2000 foreign investment statute by a text that abolishes the investment licence. Market access is therefore no longer the hard part. The difficulty has shifted to three questions an investor must settle early: the split between corporate income tax and Zakat, which follows the nationality of the shareholding rather than the nature of the activity; the choice of establishment regime — onshore, regional headquarters or special economic zone — which determines both the applicable rate and access to public procurement; and the enforcement of arbitral awards, where public policy retains a distinct effect on financial provisions.
Saudi Arabia at a glance
The growth figures above are outturns published by the General Authority for Statistics (GASTAT). Projections for 2026 were revised several times during the first half of the year and are not reproduced as such: the International Monetary Fund forecast was brought down from 3.1% to 1.7% between April and June 2026. Oil and natural gas account for 17.1% of real GDP and for approximately 54% of budget revenue.
A codified national law, with no uniform regional legal space
- No OHADA, and no equivalent. Saudi Arabia applies its own business law. Company law is governed by the Companies Law in force since 19 January 2023; investment, by Royal Decree M/19 of 11 August 2024; taxation, by the 2004 Income Tax Law and its implementing regulations. No regional uniform act and no supranational court applies on top of them.
- A recent — and retroactive — civil codification. The Civil Transactions Law — Royal Decree M/191 of 19 June 2023, in force on 16 December 2023 — codifies obligations and contract law for the first time, in 720 articles, with retroactive effect on ongoing situations. Sharia remains the residual source of law. For pre-existing contracts this calls for a review: their regime may have changed without the parties touching them.
- Onshore (mainland). Companies registered with the commercial register, direct access to the domestic market, corporate income tax at 20% on the foreign share of profit.
- Special economic zones. Four zones created in 2023 — King Abdullah Economic City, Ras Al-Khair, Jazan and the dedicated cloud computing zone — alongside the Riyadh integrated logistics zone. Each carries its own tax regime, fully activated since the implementing regulation took effect in April 2026.
- The Regional Headquarters (RHQ) programme. Not a zone but a status: it conditions access to public procurement and opens a zero-rate tax regime.
Onshore, special economic zone and regional headquarters: three distinct rationales
| Onshore (mainland) | Special economic zones | Regional headquarters (RHQ) | |
|---|---|---|---|
| Purpose | Direct access to the domestic market: distribution, services, industry, performance of local contracts | Industry, logistics, processing, data centres — sites attached to a port, an industrial platform or a digital infrastructure | Management and regional support functions of a multinational group, from Riyadh |
| Taxation | 20% on the foreign share of profit; 2.5% Zakat on the Saudi and GCC share | 5% corporate income tax for 20 years, renewable; 0% withholding tax on a permanent basis on profits repatriated out of the zone; 0% VAT on intra-zone supplies of goods. The Riyadh logistics zone applies 0% for 50 years. | 0% corporate income tax on qualifying income and 0% withholding tax on payments to non-residents, for 30 renewable years |
| Foreign ownership | 100% in most sectors | 100% | 100% |
| Point to watch | The tax regime follows the shareholding, not the activity: a change of shareholder changes the split between tax and Zakat. | Services supplied from the zone remain under the standard VAT regime; draft economic substance rules were put out for consultation in 2026. | The status requires a presence in at least two other countries, fifteen full-time employees within one year including three executives, and start-up within six months. |
The SCCA: a modern arbitration centre, and a public policy limit to know about
The Saudi Center for Commercial Arbitration (SCCA) administers arbitrations under its 2023 Rules, applicable to proceedings filed on or after 1 May 2023. Their main innovation is the creation of the SCCA Court, an independent body whose decisions on tribunal constitution, challenges and consolidation bind the parties. The statutory framework is Royal Decree No. M/34 of 16 April 2012, largely modelled on the 1985 UNCITRAL Model Law, together with the 2013 Enforcement Law, which gives awards the status of enforceable instruments.
| What works in favour of arbitration | The limit to build in at drafting stage | |
|---|---|---|
| Enforcement | Across more than 4,000 challenges examined over three years, some 90% of awards were upheld, for an annulment rate of around 8%. The 2012 Law bars the enforcement judge from reviewing the merits. | An award must not conflict with Saudi public policy or with Sharia principles. The 2012 Law did not remove that requirement: it survives as a self-standing ground for refusal. |
| New York Convention | A party since 1994. | Accession was made subject to a reciprocity reservation: recognition is confined to awards made in the territory of another contracting State applying reciprocity. |
| Financial provisions | Heads of claim awarding interest (riba) are in principle unenforceable. The consequence is practical and is dealt with at drafting stage: liquidated damages rather than an interest mechanism, remuneration structures consistent with Islamic finance principles, and severability of heads of claim so that the unenforceability of one does not contaminate the others. | |
Corporate forms and usual structuring
| Form | Regime | Typical use |
|---|---|---|
| Limited liability company (LLC) | No statutory minimum capital since the 2023 Companies Law. Minimum amounts may nonetheless follow from licensing conditions or from a sector regulator. | The most common form: trade, distribution, services, industry |
| Simplified joint stock company (SJSC) | Form created by the 2023 Companies Law: no minimum capital, single shareholder permitted, issuance of share classes and of securities giving access to capital. | Start-ups, joint ventures, investment vehicles and transactions with successive investor entries |
| Joint stock company (JSC) | Minimum issued capital of SAR 500,000, of which 25% paid up. | Larger projects, preparation for a listing |
| Branch of a foreign company | Registration with the Ministry of Investment; activity confined to the authorised object. | Performance of a specific contract, operational presence without a subsidiary |
| Regional headquarters (RHQ) | A distinct status rather than a corporate form: it sits on top of an entity registered in Riyadh. | Regional management of a group, access to public procurement |
The 2023 Companies Law also gave statutory recognition to tag-along and drag-along provisions (the latter beyond 90% of the capital): mechanisms that were previously purely contractual can now be enforced at the level of the articles — which changes how shareholders’ agreements are negotiated.
Tax regime — the essentials
| Tax | Rate | Detail |
|---|---|---|
| Corporate income tax | 20% | On adjusted net profit. It applies to the share attributable to non-Saudi and non-GCC interests, and to permanent establishments of non-residents. |
| Zakat | 2.5% | Payable in respect of Saudi and GCC shareholders. ⚠️ It is computed on the Zakat base — adjusted net worth — and not on profit: a loss-making company may still be liable. A new regulation applies to fiscal years beginning on or after 1 January 2024. |
| Mixed shareholding | Pro rata split | The foreign share of profit is subject to corporate income tax; the Saudi and GCC share enters the Zakat base. Both regimes coexist within a single company. |
| Oil and hydrocarbon production | 50% to 85% | Depending on the level of investment. The specific natural gas regime was abolished on 1 January 2018 and now falls under the general rate. |
| Value added tax | 🔴 15% | Introduced at 5% on 1 January 2018, increased to 15% on 1 July 2020. The 5% rate in the GCC framework agreement no longer reflects Saudi law in force. Healthcare and education are zero-rated. |
| Withholding tax | 5% to 20% | Depending on the nature of the payment: dividends 5%, interest 5%, royalties 15%. Services attract 5%, 15% or 20% depending on their characterisation — and the characterisation of technical and management services is a recurring source of dispute with the tax authority, to be checked contract by contract. |
| Global minimum tax | 🔑 Not transposed | To date Saudi Arabia has adopted neither a domestic minimum top-up tax (DMTT) nor an income inclusion rule. This position differs from that of the United Arab Emirates and Qatar, which have applied the global minimum tax since fiscal years beginning on 1 January 2025. |
| Personal income tax | None | There is no personal income tax, for Saudi nationals or for expatriates. Employment income is not taxed. |
| Real estate transaction tax (RETT) | 5% | On the disposal value, regardless of the condition, form or use of the property. New regulations in force since 10 April 2025: a return must be filed on the dedicated platform before any notarised deed. |
| Excise duties | 50% to 100% | Tobacco 100%, energy drinks 100%, soft drinks 50%. In force since 11 June 2017. |
| Customs duties | Up to 25% | On goods originating outside the Gulf Cooperation Council. |
| Filing obligations | 120 days | Filing and payment within 120 days of year-end, with three instalments of 25% in the 6th, 9th and 12th months. Electronic invoicing is mandatory under a clearance model, rolled out in successive waves. |
Tax sources: Zakat, Tax and Customs Authority (ZATCA), Ministry of Investment, PwC Worldwide Tax Summaries — Saudi Arabia.
A draft new corporate income tax law was released for public consultation in late 2023 but has not been enacted to date: the reference text remains the 2004 law.
Foreign investment: the licence abolished, registration retained
- A change of method. The Investment Law issued under Royal Decree M/19 of 11 August 2024, in force since February 2025 together with its implementing regulation, replaces the 2000 foreign investment statute. It abolishes the investment licence granted by the Ministry of Investment — and the fees attached to it — in favour of simple registration before carrying out any activity, with an indicative processing time of around ten working days.
- The guiding principle. A unified framework, applying without distinction to Saudi and foreign investors, replaces the separate regime that previously applied to foreigners. 100% ownership is the baseline position in most sectors.
- The exceptions have been renamed. The historic “negative list” has given way to excluded activities, in two categories: prohibited activities — closed unless the standing ministerial committee grants prior approval — and restricted activities, open subject to specific conditions. Excluded activities include upstream oil exploration and production, services connected with the Hajj and Umrah, and the capture of living marine resources; commercial agency and distribution remain reserved to nationals.
- A new annual obligation. Registered investors must update their information within the 60 working days preceding the expiry of their registration. Abolishing the licence did not abolish administrative monitoring: it shifted the burden onto the investor.
- Real estate — a regime rebuilt in 2026. Royal Decree M/14, in force since January 2026, replaces the previous system of approvals based on capital thresholds with geographic zoning: ownership by non-Saudis is open in designated zones, notably in Riyadh and Jeddah. Outside those zones it remains closed in principle, subject to a personal residence for legal residents. Makkah and Madinah are governed by a specific regime, reserved to non-Saudi Muslim individuals and to certain Saudi companies with foreign shareholders.
Investment incentives
- Regional headquarters (RHQ). 0% corporate income tax on qualifying income and 0% withholding tax on payments to non-residents, for 30 renewable years from the date of the licence. ⚠️ The programme carries a binding counterpart: since 1 January 2024, the absence of a regional headquarters in Saudi Arabia makes a company in principle ineligible for government and government-related contracts, subject to a tolerance for contracts not exceeding one million riyals.
- Special economic zones. Corporate income tax at 5% for 20 years, renewable; 0% withholding tax on a permanent basis on profits repatriated out of the zone; 0% VAT on supplies of goods between zones; entities placed outside the scope of the Zakat regulation. The Riyadh integrated logistics zone applies a zero rate for 50 years. The implementing regulation took effect in April 2026, completing the activation of the framework.
- Less developed regions. Tax reliefs are granted for 10 years in six provinces — Ha’il, Jazan, Najran, Al-Baha, Al-Jouf and the Northern Borders: a deduction of half of training expenses and of salaries paid to Saudi employees, and of a fraction of the non-Saudi share of capital.
- Tax amnesty. A scheme covering corporate income tax, withholding tax, VAT, excise duties and real estate transaction tax was extended to 30 June 2026 — a point worth checking in any acquisition involving a company with latent tax exposure.
Employment and workforce: the Nitaqat scheme
- The principle. The Saudisation programme places each employer in a colour band — red, low green, medium green, high green, platinum — according to the proportion of Saudi nationals employed, assessed by activity and by company size. An employer with five employees or fewer must have at least one Saudi national; from six upwards, the percentages set for the activity apply.
- The sanction. An employer in the red band loses the right to recruit foreign workers and may lose the right to renew existing residence permits — an immediate operational problem for a largely expatriate team.
- ⚠️ The “low green” trap. That band is technically compliant, yet it allows neither new work visas nor a change to the profession stated on a residence permit. A company that settles there finds its recruitment frozen. In practice the target should be medium green as a minimum.
- Reserved occupations. Several functions are reserved to nationals, notably human resources management, secretarial work, reception, translation, customer service and security guards. That list shapes the design of the local organisation chart itself.
- Employment law. Amendments in force since 25 February 2025 extended the probation period to 180 days and reduced the resignation notice period from 60 to 30 days.
Foreign exchange regulations
- A riyal pegged to the US dollar. The parity is set at SAR 3.75 to USD 1. The Saudi Central Bank — which has retained the acronym SAMA since the royal decree of 25 November 2020 changed its name — publicly describes the peg as a strategic choice and an anchor of monetary and financial stability. Its net foreign assets stood at USD 437 billion at the end of 2025.
- No general exchange controls. There are no exchange controls restricting the conversion or transfer of funds, and no requirement to obtain prior central bank approval.
- Repatriation of dividends and capital. Repatriation of profits, debt service, capital and capital gains is free, subject only to applicable withholding taxes and to compliance with anti-money laundering rules and sanctions regimes.
- Good practice. Document the origin and destination of flows from the moment the account is opened. As elsewhere in the Gulf, legal freedom of transfer comes with banking compliance checks that are, in practice, the main point of friction.
Regulations are liable to change — arrangements to be confirmed with the Saudi Central Bank (SAMA) and an authorised bank.
Attractive sectors
- Energy. Oil and natural gas account for 17.1% of real GDP and for 68.7% of exports in 2025 — down from 73.1% in 2024. Non-oil exports grew by 18.9% over the same period.
- Mining and metals. The sector is designated as the third industrial pillar. Mineral resources have been reassessed at approximately USD 2,500 billion, a 90% upward revision on the previous estimate, while only 30% of the Arabian Shield has been explored. The 2021 Mining Investment Law raised foreign ownership to 100%, up from 49%, with a 138% increase in exploitation licences as a result. ⚠️ The detailed licensing regime — durations, royalties, work obligations — should be checked case by case with the Ministry of Industry and Mineral Resources.
- Tourism, leisure and hospitality. A segment where delivery is real: the Red Sea tourism programme operates eight hotels and plans sixteen by the end of 2026; the Qiddiya leisure development opened its theme park in late 2025 and its water park in April 2026.
- Digital infrastructure. Data centres account for a growing share of commitments, including a 1.5 gigawatt project announced on the Oxagon industrial site for commissioning in 2028.
- Sovereign wealth fund. The Public Investment Fund reported USD 1,210 billion of assets at the end of 2025, with net income up 152%, and at that date set out a target of SAR 10,000 billion of assets under management by 2030.
⚠️ Reading the large programmes. The national transformation programme is being recalibrated, a point acknowledged publicly by the budget authorities. Several flagship projects have been resized or deferred — construction of the NEOM linear city has been postponed beyond 2030 with a reduced population target, the Trojena project has received no new investment, and the New Murabba real estate development is suspended beyond foundation works, its horizon pushed from 2030 to 2040. Others are genuinely progressing: the Red Sea programme, Qiddiya and Diriyah. For a supplier or an investor the consequence is direct: the real order book cannot be inferred from announcements, and termination for convenience provisions deserve particular attention in contracts tied to these programmes.
Securing the investment — the UGGC angle
In Saudi Arabia the difficulty does not come from the level of the rates, but from four gaps between what the text announces and what practice requires.
- Corporate income tax and Zakat are not a matter of choice — the split follows the nationality of the shareholding, and Zakat is charged on net worth, not on profit.
- Abolishing the licence did not abolish the control — registration remains, the annual update obligation is new, and the list of excluded activities is still enforceable.
- Access to public procurement is prepared upstream — without a regional headquarters, ineligibility is the rule above one million riyals.
- Arbitration works, but public policy carves up the award — heads of claim awarding interest are in principle unenforceable: this is dealt with when drafting the clause, not at the enforcement stage.
Our teams advise on these transactions in mergers & acquisitions, tax law and litigation & arbitration.
Our reading — a practitioner’s view
The figures do not tell the whole story. These are the points we draw to our clients’ attention before any establishment in Saudi Arabia.
Onshore, special economic zone or regional headquarters: which structure to choose?
The question turns on the destination of the activity, not on the headline rate. An activity directed at the domestic market — distribution, services to local businesses, performance of contracts — belongs onshore: the special economic zone regime loses its point once goods enter the customs territory and services supplied from the zone remain under the standard VAT regime. An industrial, logistics or processing activity, by contrast, takes full advantage of the 5% rate over twenty years and of the absence of withholding tax on profit repatriation. A group planning to bid for public contracts has, in truth, no choice: a regional headquarters in Riyadh is the condition of eligibility, and its zero-rate regime over thirty years also makes it the most efficient vehicle for regional management functions. Finally, a joint venture with a Saudi partner calls for a specific assessment: the split between corporate income tax and Zakat makes the tax cost dependent on how the capital is divided, which should be modelled before the shareholders’ agreement is negotiated, not after.
Three points investors underestimate
- Zakat is not a tax on profit — a loss-making company may owe it. This is the most frequent error in financial models built from Europe. Zakat is computed on the Zakat base, that is adjusted net worth: equity, provisions and long-term funding, less certain fixed assets. A company in its investment phase, heavily capitalised and still loss-making, is exposed to it even though it pays no corporate income tax at all. The reasoning “no profit, no tax” does not hold here, and the funding structure — equity against intragroup debt — has a direct effect on the charge.
- “The investment licence has been abolished” does not mean entry is unrestricted. The February 2025 reform genuinely simplified the procedure: registration has replaced the licence and its fees. But three requirements survive and are regularly discovered too late: the list of excluded activities remains enforceable and evolves; the annual update obligation within the sixty working days preceding expiry is new, and failing it weakens the registration; and sector regulators continue to impose their own conditions, including on capital, where company law no longer does. Characterising the intended activity precisely therefore remains the first task.
- An arbitration clause drafted without regard to Saudi public policy produces a partially unenforceable award. The proportion of awards upheld is high and the enforcement judge does not review the merits. But conformity with Sharia remains a self-standing ground for refusal, and heads of claim awarding interest are in principle set aside. An investor obtaining an award for a principal amount plus default interest may therefore enforce the principal alone. The treatment is preventive: prefer liquidated damages to an interest mechanism, keep heads of claim severable to avoid contamination, and check the reach of the reciprocity reservation against the intended seat of arbitration.
From the text to practice
Two points call for a case-by-case check. First, the 2023 civil codification: the Civil Transactions Law applies retroactively to ongoing situations. Long-term contracts signed before December 2023 — concessions, construction contracts, commercial leases — may have seen their regime altered without any action by the parties, notably as regards contractual liability, limitation periods and the treatment of changed circumstances. A review of the contract portfolio is not a theoretical precaution. Second, withholding tax on services: the official 5% to 20% range covers a genuine characterisation grey area, and the treatment of technical and management services is the subject of recurring disputes with the authority. We recommend not fixing a rate in a contract before the service has been precisely characterised, and providing for how the burden is allocated in the event of reclassification — failing which the withholding simply reduces the agreed price.
Frequently asked questions
What is the corporate income tax rate in Saudi Arabia?
The standard rate is 20% of adjusted net profit. It applies only to the share of profit attributable to non-Saudi and non-GCC interests. The share held by Saudi and GCC shareholders falls under Zakat, levied at 2.5% on the Zakat base, which is adjusted net worth rather than profit. A company with mixed ownership is therefore split pro rata between the two regimes. Income from oil and hydrocarbon production is taxed at a rate ranging from 50% to 85% depending on the level of investment.
What is the VAT rate in Saudi Arabia?
The standard rate is 15%, not 5%. Value added tax was introduced at 5% on 1 January 2018 and increased to 15% with effect from 1 July 2020. The 5% rate set out in the Gulf Cooperation Council framework agreement no longer reflects Saudi law in force. Healthcare and education are zero-rated. Electronic invoicing is mandatory, under a clearance model for business-to-business and business-to-government transactions.
Can a foreign investor own 100% of a company in Saudi Arabia?
Yes, this is the baseline position in most sectors. The new Investment Law, issued under Royal Decree M/19 of 11 August 2024 and in force since February 2025, abolished the foreign investment licence previously granted by the Ministry of Investment: foreign investors now simply register with the Ministry before carrying out any investment activity. Excluded activities remain, split between prohibited activities and restricted activities: upstream oil exploration and production, services connected with the Hajj and Umrah, the capture of living marine resources, together with commercial agency and distribution, which are reserved to nationals. The list is maintained by a screening committee and must be checked activity by activity.
Is a regional headquarters in Riyadh required to bid for Saudi public contracts?
In most cases, yes. Since 1 January 2024, a foreign company without a licensed regional headquarters (RHQ) in Saudi Arabia is in principle ineligible for government and government-related contracts. A tolerance remains for contracts not exceeding one million Saudi riyals. In return, the programme opens a favourable tax regime: 0% corporate income tax on qualifying income and 0% withholding tax on payments to non-residents, for thirty renewable years. Eligibility requires a presence in at least two countries other than the group headquarters and Saudi Arabia, fifteen full-time employees within one year including three executives, and the start of activity within six months.
Are foreign arbitral awards enforced in Saudi Arabia?
Yes, in a high proportion of cases. Saudi Arabia has been a party to the New York Convention of 1958 since 1994, subject to a reciprocity reservation. The Arbitration Law issued under Royal Decree M/34 of 16 April 2012 is largely modelled on the 1985 UNCITRAL Model Law, and the 2013 Enforcement Law gives awards the status of enforceable instruments. Across more than four thousand challenges examined over three years, some 90% of awards were upheld, for an annulment rate of around 8%. One limit remains: an award must not conflict with Saudi public policy or with Sharia principles, which in principle makes heads of claim awarding interest unenforceable.
Considering an establishment in Saudi Arabia?
Contact the UGGC Africa team · Download the country factsheet (PDF)
Disclaimer. This country factsheet is provided for general information purposes, as at August 2026; it does not constitute legal or tax advice and cannot bind UGGC Africa. Tax rates, special economic zone regimes and foreign ownership rules change rapidly in the Gulf and are liable to change. Any investment decision must be the subject of a tailored analysis.
Sources: ZATCA — tax legislation · Ministry of Investment — tax and regulatory overview · Saudi Central Bank Law · SAMA — exchange rate policy · GASTAT — national accounts 2025 · Saudi Center for Commercial Arbitration — 2023 Rules · UNCITRAL — status of the New York Convention · PwC Worldwide Tax Summaries — Saudi Arabia · International Monetary Fund · World Bank.