As the largest economy and most populous member of the Gulf Co-operation Council (GCC), Saudi Arabia exerts substantial geopolitical and economic influence over the region.
Notable aspects of Saudi-GCC business relationships include
- GCC Nationals Are Regarded as Citizens by Saudi Law.
Saudi law treats GCC nationals as Saudi citizens, which has several advantages for business:
– A GCC or Saudi national can establish a company and open a bank account in Saudi Arabia in three months with an initial capital requirement of US$35,040; however, foreigners must wait longer and provide more capital than citizens.
– Saudi Arabia prohibits foreign (non-GCC) investment in some industries. GCC nationals can establish a business in Saudi Arabia in any industry.
– Saudi Arabia’s 20% corporate income tax rate does not apply to GCC national-owned businesses. Their zakat tax is only 2.5%. Regardless of the country of the company’s ownership, a 5% VAT is nevertheless levied on all goods and services.
- Access The GCC Common Market
All businesses in Saudi Arabia, including those with foreign investments, have access to the GCC common market. Benefits comprise:
– Most GCC-made imports into Saudi Arabia are duty-free.
– Except for Saudi Arabia, foreigners who have residency in one of the GCC states are granted a visa-on-arrival.
- Expatriate Workers
Despite the common market, foreign workers are restricted from moving freely between GCC countries.
- Foreign Ownership
The amount of foreign ownership and control in domestic businesses is regulated in all GCC nations. And therefore, it presents a challenge for foreign investors considering establishing businesses or investing in the area.
- GCC Laws
Local business owners are prioritized by GCC laws over foreign ones, particularly in Saudi Arabia. Foreign investors with strong ties and influence (referred to as “wasta” in local parlance) are in a good position to benefit from business opportunities.
- A Double Tax Agreement
With the UAE, Saudi Arabia has a double taxation agreement. This agreement stipulates:
– Exemption from interest-related withholding taxes.
– 10% less withholding tax on royalties paid.
– A maximum withholding tax rate of 59% for dividends.
Strong Economic Links
Bahrain and Saudi Arabia have particularly close economic ties:
– Bahrain has significantly benefited from Saudi Arabia, and Saudi Arabia’s investments have been essential to the development of Bahrain. As a result, Bahraini political and economic decisions are heavily influenced by Riyadh.
– Bahrain is the most popular place for foreigners to live in the GCC. Foreign nationals with a Saudi iqama or Saudi residence and employment visa do not need a separate employment visa for Bahrain. And they frequently opt to reside in Bahrain and travel to the Eastern Province of Saudi Arabia by the King Fahd Causeway.
– Manama (Bahrain) is only a 40-minute drive from Al Khobar and a 55-minute drive from Dammam.
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- The Saudi-Oman Trade
Every year, 2.1 million tonnes of goods are traded across the Saudi-Omani border. It is noteworthy that by the end of 2021, a 725-kilometre-long road connecting Oman and Saudi Arabia opened, ushering in “a new life of prosperity” for residents of the Empty Quarter and reducing travel time between the countries by 16 hours.
Regarding maritime, Saudi Arabia and the Sultanate of Oman recently signed a contract to strengthen their cooperation in the marine transport sector.
- GCC Initiatives
The majority of the oil for the GCC comes from Saudi Arabia, Kuwait, and the UAE. These countries, along with Bahrain, Oman, and Qatar, have new economic development plans. These initiatives aim to diversify state revenue sources away from the oil and gas industry and draw capital to sectors like real estate, tourism, and consumer goods. It also seeks to create a regulatory environment that will encourage the growth of industries like finance (including Islamic finance and FinTech) and open up new economic sectors to foreign investment and local job creation.
