Legal Developments

Government to implement further anti-concealment (Tassatur) measures

The MOCI is finalizing a plan to combat the practice of tasattur. Tasattur is the colloquial name for the practice by which unlicensed foreign investors carry out business in the name of Saudi nationals in return for payment, and is in violation of the Kingdom’s Anti-Concealment Law. Sources report that the plan should be announced within the month and will be implemented before the end of the year. The plan involves the introduction of points-of-sale, and will be executed in phases, beginning with larger businesses and progressing to smaller ones. According to sources, the bulk of tasattur takes place in the retail sector, followed by the contracting sector. It is not clear how the introduction of points-of-sale are intended to combat tasattur. Presumably, the government may utilize records from points-of-sale to monitor financial activity, such as siphoning off fees to concealers and accomplices in tassatur activities.

Saudi Gazette – 14 September 2017

Clearance of SAR189 billion in dues owed to private sector

The private sector in the Kingdom, which is largely dependent on state spending and development projects, will soon receive a surge in cash from the government. The Ministry of Finance (MOF) reported that it received a total of 345,000 payment orders with a sum of SAR525 billion from 450 government entities. The MOF cleared the payment of 36 per cent of the total payment orders worth SAR189 billion to private businesses. The Council for Economic and Development Affairs (CEDA) has cleared payments owed to the private sector under budget allocation for the current financial year.

Further, as part of the National Transformation Program (NTP), and in an effort to end the previous method of payments by individual ministries directly to private businesses, the Kingdom has initiated reforms in government payment methods with a focus on transparency and efficiency. Through the National Finance System and e-payment, all bills and expenditures will now be submitted directly to the MOF through its electronic portal, instead of being submitted to the ministry in question. Under the new regime, a number of construction companies have been receiving payments and a few of them have been able to clear the pending wages and financial arrears of their employees.

Saudi Gazette – 4 October 2017

Saudi health council probes high cost of medicines and localization of pharmaceutical manufacturing

The Saudi Health Council (SHC) held its 79th meeting and approved a number of different measures, including:

  • the establishment of a national committee to study the issue of high cost of medicines used to treat Hepatitis C, hereditary diseases, blood diseases, and cancer;
  • a recommendation that scientific studies be conducted locally to prove the efficacy of these medicines and to encourage their local manufacture;
  • the establishment of a national centre for evidence-based medicine (EBM) and the application of the regulations for national health centres issued regarding EBM;
  • the issuance of directives to study the establishment of a specialized national center for the treatment of burn injuries in Riyadh;
  • the recommendation of the committee supervising the national program for kidney diseases on the necessity to unify measurement units for lab analyses for renal patients in all health sectors to Si units; and
  • the requirement that all health sectors must admit cases of ST-Elevation Myocardial Infarction (STEMI) brought in by the Saudi Red Crescent Authority.

Saudi Gazette – 1 October 2017

As we have described in previous updates, pro-Saudization activists in the Kingdom have increasingly decried Article 77 of the Labor Law and the effects on Saudi employees who are terminated under its provisions. Despite the fact that the Ministry of Labor has warned companies against abusing Article 77 of the Saudi Labor Law to dismiss Saudi employees, labor experts say that the number of Saudis who have been fired has increased. Article 77 of the Labor Law allows employment contracts to be terminated at any time for no reason by providing the fired employees with a statutory compensation. The ShouraCouncil has previously received numerous complaints about alleged abuses of Article 77 and has agreed to look into the issue, but no action has yet been taken.

Saudi Gazette – 5 October 2017

The Shoura Council is currently looking into amending the Anti-Cyber Crimes Law, which is a basic statute that essentially criminalizes certain activities involving computers or information technology. Committee members have advocated that the Anti-Cyber Crimes Law, adopted 26 March 2007, is in need of updating given the fast-paced development of technology in the information age. One proposed amendment would criminalize the disclosure of information obtained from individuals or institutions, as well as the disclosure of the means to access such information. If convicted, individuals could face fines of up to SAR5,000 (US$1,333) and imprisonment of up to one year.

Saudi Arabia does not have a robust data protection and privacy statutory regime, but traditional notions of privacy and Shari’a principles create potential liabilities.

The General Authority of Zakat and Tax (GAZT) has approved the implementing regulations to the Kingdom’s new VAT law. The VAT law is set to take effect on 1 January 2018. The regulations set out the scope of taxation for certain goods and services, explain registration rules and eligibility of businesses for the VAT, zero-rated and exempted supplies, and the treatment of imports and exports.

Saudi Gazette – 25 September 2017

Typically, obtaining a foreign investment license (SAGIA license) from the Saudi Arabian General Investment Authority (SAGIA) can be a long and difficult, document-heavy due diligence exercise. However, SAGIA’s semi-annual report announced a 130 per cent increase in issuance of foreign investment licenses. During the first half of 2017, SAGIA licensed 158 projects with a total capital of SAR3.258 billion, compared to 127 licenses with a capital of SAR1.392 billion in the first half of 2016. At SAR254 million, China ranked first among the countries licensed to invest in the Kingdom, followed by the US (SAR187 million) and the Netherlands (SAR180 million). These results are in line with the goals of Vision 2030, which seek to further liberalize and open up foreign investment in the Kingdom.

Saudi Gazette – 18 September 2017

Banking and Finance Developments

HSBC Saudi Arabia (HSBC-SA) successfully completed the Kingdom’s first accelerated bookbuild (ABB). ABB is a practice whereby an offering is conducted over a short period of time for pricing and selling blocks of shares in a listed company. HSBC-SA sold 16,000,000 shares in Almarai Company, representing a 2 per cent block of its share capital. HSBC-SA acted as the sole bookrunner in the transaction announced by the Savola Group on the Saudi Stock Exchange (Tadawul) on 12 September. The sale was executed on 13 September.

Saudi Gazette – 17 September 2017