TheIndianEXPRESS (DELHI I MUMBAI) FEBRUARY 27 I 2014 The Kingdom of (ALL EDITIONS) A SPONSORED FEATURE BY TRANSCOM Saudi Arabia Commemorative feature on the visit of Crown Prince Salman Bin Abdul Aziz to India An initiative by * A royal visit to foster shared interests W ITH Saudi Arabian Crown Prince Salman bin An official visit by Prime Minister Manmohan Singh to Abdulaziz Al Saud currently on an official visit Riyadh in 2010 and the Riyadh Declaration signed Feb 28, to India from February 26 to 28, it is the highest 2010 elevated the bilateral engagement to “strategic partlevel political visit from the kingdom after the 2006 land- nership” covering security, economic, defence and political mark trip by King Abdullah bin Abdulaziz Al Saud as chief areas. Saudi Arabia is India’s fourth largest partner with guest at the Republic Day celebrations.Crown Prince bilateral trade of over $43 billion in 2012-13. Saudi Arabia Salman, who is also Saudi Arabia’s deputy prime minister is also India’s largest crude oil supplier accounting for and defence minister, was inabout one-fifth of total vited to India by Vice President imports in 2012-13. IndiHamid Ansari. He is accompaWidening the scope ans form the largest expanied by a delegation comprising triate community in cabinet ministers, senior offiTHE Saudi Minister of Commerce & Industry, Mr. Tawfiq Saudi Arabia. There are cials and captains of industry. bin Fawzan Al Rabiah,and the Saudi Minister of Economy over 2.88 million Indian The crown prince will call on and Planning, Mr Muhammad Al Jasser will be attending a nationals working in President Pranab Mukherjee business meet at FICCI headquarters today (February 27) to Saudi Arabia. In recent and Prime Minister Manmohan widen the scope of Indo-Saudi business relations. The two years, there has been sigSingh and also hold bilateral ministers are expected to sign 3 MOU’s. nificant progress in bilattalks with Vice President Though not an official meeting of the Indo-Saudi Joint eral co-operation in key Hamid Ansari, said an external Business Council, it will be attended by the Chairman and areas of mutual affairs ministry statement. This Members of the Council of Saudi Chambers (Riyadh) and interest, including energy will be Crown Prince Salman’s FICCI. FICCI has also invited Indian business persons to security, trade and second visit to India. He last attend this meet and interact with the visiting Saudi business infrastructure developcame in April 2010 when he was delegation. ment projects, said the governor of Riyadh province. statement. Custodian of Two Holy Mosques, HM King Abdullah bin Abdul Aziz Al Saud Restructuring of the Saudi economy The main objective being effective contribution by the private sector for the production of goods and services and reducing a dependency on oil S TEADY GROWTH rates and the restructuring of the Saudi economy have opened up new horizons. As a result, hundreds of sectoral, regional and privatisation investment opportunities are being generated every year. The Saudi government has been consistently pursuing various procedures for privatising enterprises owned by the government. The main objectives of these procedures are to promote more effective contribution by the private sector to the provision and production of different goods and services, reduce dependence on oil as the main source of income and further increase private investments. Significant changes in foreign investment regulations were made in 2000 to attract more investors to the Kingdom. There may be further changes in the near future — including additional tax incentives — when Saudi Arabia joins the World Trade Organisation (WTO). Features of the current investment climate include: G Growing domestic demand due to an increasing population G The tracking and abolishing of investment barriers and administrative obstacles. G Secure lucrative investment opportunities due to a prominent position in the world’s oil, gas, and petrochemical industries. The Saudi Arabian General Investment Authority (SAGIA) has recently publicised its investment strategy, www.sagia.gov.sa 1. BUSINESS INCENTIVES There has been a major overhaul of tax and property regulations, making investment in the kingdom more attractive. The effective rate of company taxation has been reduced by 15% for profits in excess of SR100,000 and it is now possible for foreign companies to own property. Losses can be carried forward for tax purposes. A wide range of incentives is available to foreign investors, particularly those with partial Saudi ownership. Interest-free loans are available for industrial projects spread over 15 years, with a grace period before repayment begins, and interest-free loans for up to 50% of project costs from SIDF. The finance offered is less for projects with under 50% Saudi ownership. Similar funding for agricultural projects takes place via the Saudi foreign company. The Regulations of Company Law do not cover offices established by foreign companies for purposes such as liaison or for technical or scientific reasons. However, these must still have permission to operate and must register at the Commerce Ministry. Foreign companies seeking joint ventures have to be registered under foreign investment regulations. The incentives available to such partnerships are often determined by the extent of Saudi ownership. Ambassador Saudi Al Sati Arabian Agricultural Bank. Joint ventures can enjoy tariff protection of up to 20% if they can supply a high quality product and satisfy a high proportion of local demand and may also qualify for low rental factories on industrial estates with low cost water and electricity. Customs duties on imported machinery, spare parts and raw materials may also be waived for joint ventures and grants are on offer to train Saudi nationals. WTO membership may bring changes to these incentives. 2. TYPES OF BUSINESS Companies are regulated under royal decrees issued in 1965, 1982 and 1992; details can be provided by the Companies Administration Department at the Commerce Ministry. Those considering setting up a business in Saudi Arabia are advised to consult a Saudi lawyer as the regulations are complex. Foreign investors usually form jointstock companies or limited liability partnerships (companies), but other forms of registered business operations include general partnerships, joint ventures (temporary arrangements), co-operative companies and partnerships limited by shares, and a registered branch of a 3. TRADE REGULATIONS Import tariffs have been reduced from 12% to 5% on a wide range of goods in December 2002, the Doha declaration of the Gulf Cooperation Council introduced a common external tariff for GCC of 5%. However, for certain specific items, a higher duty of 12%-20% is applicable to protect the local industry. There are no controls on most imports but some items such as alcohol and pork products are prohibited. Others such as imports of arms and armaments require a special licence from the Interior Ministry. The Saudi Food and Drug Authority (SFDA) enforces regulations on imports of various meat and foodstuffs. Certain goods exported to the Kingdom may need to be inspected in their home country before shipment under the international certification programme. SASO can provide details on these regulations and requirements on www.saso.org.sa. 4. EXCHANGE CONTROLS The Saudi Arabian Monetary Agency (SAMA) acts as the central bank and controls the Saudi monetary supply. There are no exchange controls on the Saudi Riyal; capital, profits, and salaries may be repatriated freely. In addition, bank accounts in riyals and in dollars are unrestricted, and gold and foreign currencies may be freely SIGNIFICANT CHANGES IN FOREIGN INVESTMENT REGULATIONS WERE MADE IN 2000 TO ATTRACT MORE INVESTORS TO THE KINGDOM. THERE MAY BE FURTHER CHANGES WHEN THE COUNTRY JOINS WTO bought and sold. 5. DOCUMENTATION Imports need accompanying documentation. This normally includes commercial invoices, certificates of origin, a bill of lading, a steamship company certificate and insurance certificate. Several copies may be necessary, some of which must be in Arabic and others legalized by a Saudi consulate office or Chamber of Commerce. Food and medical products often require additional documentation such as ingredient and consumer protection certificates. Meat products should also specify that slaughtering procedures comply with Saudi regulations. 6. AGENCY AGREEMENTS Foreign companies employing the services of a licensed local Saudi agent to sell goods in the Kingdom as foreign investors are not allowed to engage in trading activities. The Ministry of Commerce and Industry can supply specimen agency contracts. All agents have to be registered within three months of signing an agency agreement. Foreign investors are allowed to operate and execute contracts with government agencies without a Saudi agent. Unlike most other countries, there is no centralized tendering board. All official government agencies can enter into contracts. Guarantees are required to bid in a government contact. 7. TAXATION A zakat or income tax (a religious wealth tax) is assessed on the taxable income of most business organizations. Since only Saudis and GCC nationals are subject to zakat, foreigners pay an income tax in proportion to their equity interest. Foreign employees are not taxed on their salaries or wages. There is no sales tax. Capital gains fall under the same umbrella as ordinary income. Taxable net income is fairly consistent for all types of business organisations, foreign or resident. 7.1 CORPORATE INCOME TAX Corporate income taxes are levied Continued to page 3… * HRH Prince Salman bin Abdul Aziz Al Saud, Crown Prince, First Deputy Prime Minister and Minister of Defence Boosting growth hand-in-hand I NDIA and Saudi Arabia are all set to that he and Tawfiq Al-Rabiah reviewed ink a defence cooperation pact dur- the progress made by the two countries ing the visit of Crown Prince and in various sectors including trade and Defence Minister Salman Bin Abdulaziz investment, oil and gas, pharmaceutito New Delhi. cals, higher education, civil aviation, The two countries will sign a Memo- tourism and culture and security afrandum of Understandfairs. ing (MoU) on defence India and Saudi cooperation on FebruArabia will operaary 28 during the threetionalise a billion-USday Delhi visit of Saudi dollar joint investArabian crown prince ment to fund and defence minister infrastructure and Salman bin Abdul Aziz boost growth. The al Saud. The MoU pro50:50 fund (the two vides for a proper bilatcountries contributeral defence policy ing equally) will be group with defence minjointly headed by istries on both sides setnominated CEOs. ting the agenda. The amount may A joint panel constibe increased during tuted by Saudi Arabia the 78-year-old and India has been prince’s meeting with working on a draft dePM Manmohan fence pact, which was THE MOU THAT Singh on February agreed upon by Crown 28. New Delhi is Prince Salman and the WILL BE SIGNED preparing to roll out Defence Minister A K DURING THE VISIT the red carpet for the Antony during the lat100-strong delegater’s visit to Riyadh in WILL BE ON JOINT tion accompanying 2012. Prince Salman, who MILITARY The agreement will is also the vice custobe on joint military exer- EXCERCISES, dian of the two holy cises, hardware sales HARDWARE SALES mosques in Mecca and transfer of technoland Medina. ogy. Riyadh has signed a AND TRANSFER OF The prince’s similar agreement with TECHNOLOGY. chiefly political visit Islamabad this week. looks to strengthen a Chidambaram, who A SIMILAR quietly developing was officially in the AGREEMENT WAS relationship. Riyadh Kingdom for the 10th and Delhi have alsession of the Saudi-In- SIGNED WITH ready institutiondia Joint Commission alised intelligence PAKISTAN THIS Meeting (JCM), said that links and deepened the Kingdom and India WEEK cooperation on “have been able to make counter-terrorism. significant progress in Riyadh has made relations over the past it clear that it will few years.” Chidambaram’s visit was not allow any antialso meant to further cement bilateral India activity on its soil and will deny cooperation in an entire gamut of ideological platform to any terrorist trade, commerce and other vital sec- group operating from Pakistan tors. In this regard, the Indian minis- or within India. ter’s visit should be termed a major success. Both, India and the Kingdom lauded the JCM’s linear progress with Chidambaram and the Saudi Minister of Commerce and Industry Tawfiq Al-Rabiah signing the minutes at the end of the JCM meeting. It highlighted the Commission’s satisfaction over the substantial progress in the volume of trade exchange between the two countries that reached $43 billion in 2013, and looked forward to further enhancing the trade exchange. Chidambaram said ( READ. ENGAGE. DELIVER.) IS THE MARKETING SOLUTIONS TEAM OF THE INDIAN EXPRESS GROUP
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