Doing Business in the Middle East blog series

Spotlight on the Kingdom of Saudi Arabia

The Middle East, perhaps more than any other region, is currently at the epicentre of many of the megatrends reshaping the world, such as social progression and population growth, climate change and natural resource scarcity. Its central role in the global energy supply, and location between Europe, Asia and Africa, at the heart of major trading routes, are among the region’s most valuable assets. 

In this three part blog series, we examine the current legislative and economic developments and trends shaping the future of this exciting region, which is starting to position itself as a major attraction for inward investment from around the world, starting with the Kingdom of Saudi Arabia.

Investing in the Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia (KSA) is now transforming to become the region’s hub for investments in the light of the various reforms and initiatives rolled out over the last 12 months, with more changes still to come.

Back in 2016, the Crown Prince, His Royal Highness Mohammad bin Salman, announced Vision 2030, a comprehensive plan aimed at growing and diversifying KSA’s economy. The recent reforms and initiatives, driven by Vision 2030, have already succeeded in increasing investment, as new businesses expanding into the Kingdom take advantage of the nation’s key assets.

Growth in economy

Despite the recent challenges in the oil market, the growth of the KSA economy remains strong making it the largest economy in the Middle East (GAStat). During the third quarter of 2020, KSA had a GDP of SAR 668 billion (USD$ 178 billion). KSA has significantly improved its ranking on the World Bank’s most recent Ease of Doing Business report by jumping 30 places. This continuous growth is  elevating the country’s reputation as a key player, not only in the region but also now more and more at a global level.

Increasing investment appeal

“Saudi Arabia… The investment powerhouse, the hub connecting three continents”, reads the headline on the Vision 2030 data page, with three main pillars underpinning  the country’s innovative agenda - a vibrant society, a thriving economy and an ambitious nation. 

Vision 2030 describes various approaches to achieving a prospering economy, the most significant being the planned shift from its economic dependency on oil by investing in infrastructures to support the diversification of the economy into manufacturing, technology and mining. 

KSA recently announced the establishment of new Special Integrated Logistics Zones (“ILBZ”) aimed at attracting foreign investment and increasing the perception of KSA as a regional hub. As per the regulations setting out the rules for ILBZ, entities established and carrying out approved activities inside ILBZ will be exempt from KSA corporate income tax for fifty years. In addition to the income tax exemption, the initiative will not consider non-residents conducting economic activities inside the Zone as Permanent Establishments. Also, goods located inside ILBZ will be free of custom duties and VAT (GACA).

Additionally, the Saudi Arabian Ministry of Human Resources and Social Development launched a labor reform initiative (LRI) to replace the existing sponsorship system (Kafala).This initiative will allow more freedom of movement between employers, signalling a substantial modification to the private sector sponsorship system, from March 2021. 

Healthcare and education industries are in the process of progressing and expanding throughout the private sector. Further, the development and collective operations conducted by both sectors are aiming to continuously improve and attract foreign tourism and investors willing to invest in the thriving and flourishing KSA market.

A changing and complex environment

Looking at the region as a whole, the regulatory frameworks of many Middle Eastern countries have lately been significantly reformed. In KSA, the main reforms over the last 12 months have been:

  • The tripling of the VAT rate from 5 to 15%.
  • The implementation of Transfer Pricing (“TP”) guidelines and introduction of Country by Country reporting (“CbCR”) rules.
  • The implementation of Real Estate Transaction Tax (“RETT”) in KSA as of October 2020. 
  • The abolishment of the sponsorship system as of March 2021.
  • The introduction of E-Invoicing regulations to be implemented in December 2021.

It’s important for businesses considering expansion or establishment in KSA - particularly international groups considering inbound investments - to consider the appropriate tax and legal structures and operating models, in order to maximise the potential for success. It’s also vital to identify potential immigration and employment challenges, government approvals, social security and regulatory compliance obligations.

Complexities that may arise include:

  • Choice of ownership structures
  • Fees for business registration and licensing
  • Tax and business laws prone to change
  • Limited clarity around some elements of the legal framework, with many regulations in Arabic requiring businesses to have an Arabic reader/write
  • Access to information on tax and legal matters can be challenging
  • Immigration regulations surrounding the hiring of locals/expats (i.e. Saudisation, Nitaqat framework)

Overall, the Kingdom of Saudi Arabia represents a rapidly evolving business environment. At PwC, we recognise the complexity around the different local regulations and the interconnectivity between tax, legal and accounting. Our specialist Pathfinder advisers can draw on the local expertise of our firm throughout KSA and the wider region to anticipate our clients’ needs and provide the practical advice they need.

We understand the processes involved in establishing a presence in KSA enabling business leaders and investors to navigate this journey and realise their growth ambitions.

To find out more, visit our dedicated website or reach out to one of the team directly.

Coming soon, the next article in our Doing Business in the Middle East blog series will take a look at the changing face of investment and the economy in United Arab Emirates.


1)  General Authority for Statistics. 2019. National Accounts. [Online] Available at:

2) GACA. 2020. Special tax rules for the Special Integrated Logistics Zone

Contact us

Yaseen AbuAlkheer

Partner, Zakat and Tax, PwC Middle East

Tel: +966544250540

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