Establishing and Operating a Non-Profit Organization in Saudi Arabia as a Foreign Entity

Historically, Saudi Arabia saw a variety of organizations that promote civic purposes in their respective communities. These organizations, however, were vastly government-affiliated and underdeveloped in their administrative and legal approach.1 Today, following the implementation of the Law on Associations and Foundations, the government has aimed for an increase to the non-profit sector’s contribution to the GDP up to 5% and to recruit up to one million volunteers to pursue the Saudi Vision 2030. Today, there are currently 3,156 non-profit organizations in the country.2

I. General

Saudi civil associations and organizations were governed by the Regulation of the Charities and Associations which was issued by the Council of Ministers in 1990. In 2006, the country saw civic reform when the Ministry of Human Resources and Social Development (“HRSD”) proposed a draft for a legal framework for governing non-governmental organizations, which aimed to reform the existing restrictive framework. In 2008, the Shura Counsel approved of the revised draft and submitted it to the Cabinet. In 2015, the Royal Decree No. M/8 approved of the Law of Civil Society Associations and Organizations under a session chaired by King Salman. This became the first comprehensive legal framework for governing non-governmental organizations, associations, and foundations. The law became effective on March 17, 2016, and the subsequent implementing regulation was published on April 14 of that year.3

II. Setting up a Non-Profit

According to the Implementing Regulation of National Associations and Establishments Law, a non-profit organization may be established either through at least ten other Saudi nationals who are applicants, or it may be established through a legal entity (e.g., a Saudi company or a foreign company).4 Once the application is submitted, the HRSD will issue a decision to reject or approve the application within (60) days of its completed submission.5

For the application to be successful, the non-profit organization must have a purpose and implement activities are within the scope of the specific categories laid out in the Regulation:6

1. Charity, solidarity, public services or care.

2. Religious, social, cultural, health, environmental, developmental, raising awareness, technical or seasonal.

3. Educational, learning, scientific, research or training.

4. Professional, vocational, innovational, youthful, women, children, tourism or volunteering.

5. Consumer protection and family protection.

6. Disasters and crisis and realization of society safety.

7. Family and social development.

8. Any other national activity valued by the Ministry

If an entity or government authority does not fall squarely into any of the prescribed categories, it may still nonetheless participate in the activities and execute relevant projects or services by contracting with an already established a non-profit organization.7

III. Promised Benefits

One of the main benefits of establishing a non-profit entity in Saudi Arabia is that the HRSD may grant a public benefit status to the entity if it meets the set five criteria.8 The public benefit status protects the funds of the relevant entity from expropriation except seizure by judicial decision and allows the entity to take real property with compensation if it the property serves the entity’s relevant public purpose.9 The following criteria are as such: first, the objective of the non-profit must be for public interest. Second, the activity must reach the sector of society in the stated purpose. Third, the membership of the general assembly must be open. Fourth, there must be no outstanding violations of the law. Fifth, there must be among the members of the board of directors two competent experts in the relevant field. If one of these criteria are not met at any time, the Minister of Social Affairs may decide to revoke the public benefit status.10

Another benefit is that the Law on Civil Society Associations and Organizations states the availability of an association support fund for entities that fall within the scope of the law.11

Non-profit organizations previously received exemption from zakat that were applicable to other commercial and governmental entities. However, today non-profits are not exempt from zakat or taxation if they participate in economic activities or if the funds received are not solely used for the organization’s non-profit objectives.12

IV. Limitations that Remain

Government oversight, although decreased since the establishment of the laws and regulations, still remains prominent over the non-governmental sector. Fund raising activities, or establishing branches13, or entering into contractual relations with international states, such as obtaining membership or receiving services, must be approved by the Ministry.14 The Ministry also, to an extent, monitors the organization’s board of directors and internal affairs.

Furthermore, the Minister of HRSD may decide to temporarily suspend activities of the association upon several cases. One notable instance is if the organization departs from its objectives or violates public order, public moral, or any act that violates national unity.15 The Minister is required to provide warning and a reasoned decision prior to implementing the suspension. Nevertheless, the Minister’s decision may be appealed under Article 13 of the Law of Board of Grievances (see Case No. 4, Administrative Court of Appeal 3025 (8/4/2019), where an appeal to the Minister’s decision to suspend a non-profit entity’s activities was granted and the Minister’s decision was reversed in favor of the entity.)16

V. Summary and Recommendations

Saudi Arabia has come a long way in the past three decades to reform and reinstitute a comprehensive legal structure for civic associations. The implementation of the first Law of Civil Society Associations and Organizations in 2015 was a large step forward toward this goal. The subsequent rise in non-profit entities in the country has given good momentum to usher realizing the goals of the 2030 Vision. Combined with the current state of non-profit entities’ exemption from taxation and zakat, the availability of an association support fund, as well as the disposal of a public benefit status, there are many incentives now to establish a non-profit as a foreign entity. Therefore, it is generally recommended for foreign entities that desire to participate in civic services in Saudi Arabia to either enter into contractual agreements with local governmental or private entities that carry out the desired activities or establish a non-profit organization under the current system or branch one out from a foreign base.

Cited Works

Coogle, Adam. “Dispatches: Better Late than Never – Saudi Arabia Approves Ngo Law.” Human Rights Watch, October 28, 2020. https://www.hrw.org/news/2015/12/02/dispatches-better-late-never-saudi-arabia-approves-ngo-law.

Case No. 4, Administrative Court of Appeal 3025 (8/4/2019). Accessed April 6, 2022. shorturl.at/ajmE1.

Implementing Regulation of Civil Society Associations and Organizations Law (1437).

Law on Civil Society Associations and Organizations (2015).

“Saudi Arabia National Portal.” في المملكة العربية السعودية. Accessed March 31, 2022. https://www.my.gov.sa/wps/portal/snp/eParticipation/civilSocietyPartnership.

“Saudi Arabia.” ICNL, June 25, 2021. https://www.icnl.org/resources/civic-freedom-monitor/saudi-arabia.

Zakat Mini Guideline (2018).