Regulatory Environment

Saudi Arabia’s regulatory environment can pose challenges for foreign firms. While the government has made progress on streamlining procedures, many U.S. companies cite a lack of transparency and predictability in the development and enforcement of regulations. Inconsistent implementation across government entities, limited stakeholder consultation, and unclear timelines for regulatory updates can complicate compliance and long-term planning.

Taxation

Taxation also presents a challenge for some businesses. While there is no personal income tax, Saudi Arabia levies a 15 percent Value Added Tax (VAT) and a 20 percent corporate income tax on non-GCC foreign entities, in addition to zakat requirements for Saudi-owned firms. Recent enforcement of transfer pricing rules, stricter documentation obligations, and evolving interpretations by the Zakat, Tax and Customs Authority (ZATCA) have increased the compliance burden for multinational companies. Firms report difficulty obtaining clear and timely guidance on tax matters as well as resolving disputes, particularly when navigating cross-border operations or government procurement. 

Standards and Technical Regulations

Saudi Arabia continues to move toward a single standard in technical regulations, which is often based on International Organization for Standardization (ISO),  International Electrotechnical Commission (IEC) standards, and United Nations Economic Commission for Europe (UNECE) standards, to the exclusion of other international standards, such as those developed by U.S. domiciled standards development organizations (SDOs). Saudi Arabia has demonstrated an increasing preference for European standards versus standards often used by U.S. manufacturers, which can create significant market access restrictions for industrial and consumer products exported from the United States.
Stakeholders continue to raise concerns that Saudi Arabia develops standards and technical regulations without meaningful consultation with industry, clear guidance on implementation, or sufficient transition times for companies to comply. For example, in the automotive sector, U.S. exporters have expressed concerns over the frequent and abrupt updates to vehicle technical standards issued by the Saudi Standards, Metrology and Quality Organization (SASO). 

Branding and Content

Despite a relaxation of social strictures, Saudi Arabia remains a conservative country, and as such, the Saudi market can be very sensitive to branding and materials content. U.S. companies are encouraged to familiarize themselves with Saudi traditions, customs, and strict observances of the Islamic faith to ensure that branding does not unintentionally offend local norms and practices. The Kingdom’s media laws remain opaque and are inconsistently enforced, which creates uncertainty for companies operating across digital and advertising platforms. While many infractions are quietly handled, the government has on occasion chosen to publicly enforce penalties to set an example, particularly when content is deemed socially or religiously offensive. Companies that run afoul of media laws have reported a lack of recourse and transparency to resolve these issues in a timely manner.

Performance and Localization Requirements

Government-controlled entities in Saudi Arabia are increasingly introducing local content requirements for foreign firms. Saudi Aramco’s “In-Kingdom Total Value Added” (IKTVA) program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to retain Aramco’s percentage of locally manufactured energy-related goods and services at a minimum of 70 percent. Saudi Arabia’s military is reforming its procurement processes and policies to incorporate new Saudi employment and localized production goals. Saudi Arabia’s Vision 2030 economic diversification initiative calls for 50 percent of defense materials to be produced and procured locally by 2030 and simultaneously seeks comparable increases in the number of Saudis employed in this sector. The core mandate of Saudi Arabia’s Local Content & Government Procurement Authority (LCGPA) is to monitor policies and regulations, develop local opportunities, promote transparency, and leverage partnership with the public and private sectors to grow local content improve government procurement processes. Various governmental and state-owned entities have developed their own local content programs.
Saudi Arabia is also implementing broader localization policies across sectors through the Economic Participation Program (EPP). Administered by the Ministry of Industry, the LCGPA, and sector-specific authorities, the EPP requires companies bidding on major government and state-owned enterprise contracts to commit to defined levels of local economic contribution, including Saudi employment, local sourcing, technology transfer, training, and the establishment of regional headquarters. The EPP is now being applied in sectors beyond defense, including energy, infrastructure, ICT, and healthcare. Foreign firms are expected to submit detailed economic participation plans as part of tender evaluations, and compliance with localization commitments is increasingly being monitored and factored into future bidding eligibility. These requirements may pose challenges for U.S. companies unfamiliar with the evolving standards and metrics but also open avenues for joint ventures, manufacturing partnerships, and investment in local talent development.

“Saudization”

The Saudi Arabian Government is adopting progressively stricter quotas for hiring Saudi nationals. U.S. companies report increasing difficulties obtaining visas for expatriate professional employees, while others have left the country due to the slowing of opportunities or have not had their work visas renewed because of this law. Firms also may face challenges in finding enough qualified Saudi nationals to fill jobs. In some cases, public procurement regulations now require companies to “Saudize” project teams as a condition of contract award or continuation, even in technical areas where qualified Saudi professionals may be scarce. This can create staffing challenges, increase project risk, and impact timelines for complex or specialized contracts. Saudi Arabia’s new three-tier work permit system, part of its Vision 2030 labor reforms, introduces a categorization of foreign workers as “Highly-Skilled, Skilled, or Basic.”  This system aims to align expatriate skills with industry needs and begins to shift some control of documents and employee status from work sponsors to the Ministry of Human Resources and Social Development (MHRSD), which will manage the new visa allocation process through the digital Qiwa platform. These reforms do not significantly alter the notable authority vested with the Saudi visa sponsor.

Unsolicited Contracts (Scams)

The U.S. Commercial Service in Saudi Arabia continues to hear from U.S. firms receiving unsolicited but seemingly attractive business proposals from scam artists. Businesses should be particularly wary of unverified Saudi “companies” and/or government entities promising lucrative business deals and demanding staggered payments to progress through a non-existing procurement process. Perpetrators of sophisticated internet scams use Saudi Arabia’s wealth and admiration for American products and services to lure unsuspecting U.S. companies and citizens with “419” type scams (named for a Nigerian law aimed at combating financial crimes). U.S. businesses should verify the identity of any potential “partner” and the veracity of proposals before committing any resources. As a rule of thumb, all official government entities use email addresses and websites ending in “.gov.sa” and any correspondence from domains that do not follow this standard should be treated with caution and verified before proceeding. The registration and legitimacy of Saudi companies can be verified through the Saudi Ministry of Commerce.

Delayed Payments

U.S. companies may experience payment delays for contracts performed for Saudi public- and private-sector entities. In April 2021, the Ministry of Finance launched the “Etimad” platform which, in theory, enables companies to submit their financial claims online to government agencies, however some firms have still raised concerns about ongoing delayed payments.

Even when timelines are tight, U.S. companies are strongly advised not to begin work without a fully executed contract. There have been cases in which firms were pressured to start work informally and later encountered difficulties securing payment, especially when no binding agreement was in place.

U.S. companies should take steps to mitigate the risk of late payment and non-payment in Saudi Arabia. Of course, payment up front is the safest approach. A letter of credit and export credit insurance are also ways to manage this risk. The Export-Import Bank of the United States provides U.S. businesses with these and other solutions to protect against foreign buyer nonpayment. 

Commercial Disputes Settlements

In 2016, the Saudi Center for Commercial Arbitration (SCCA) was established with arbitration rules that conform to internationally recognized standards and principles. The SCCA offers comprehensive dispute resolution services to both domestic and foreign firms. Some firms have already started referencing the SCCA in their contracts. SCCA arbitration awards can be enforced in local courts if they comply with sharia (Islamic law). The enforcement of foreign arbitration awards for private-sector disputes has yet to be upheld in practice. Saudi Arabian Government agencies are not allowed to agree to international arbitration without express approval from the Council of Ministers, which is rarely granted. New 2023 SCCA Rules empower the newly created SCCA Court (which replaced the Committee for Administrative Decisions) to make key determinations in SCCA proceedings, including appointing emergency arbitrators, settling arbitrator challenges, determining jurisdiction, and reviewing the approval of awards.

As with any investment abroad, it is important that U.S. investors take steps to protect themselves by thoroughly researching the business record of a proposed Saudi partner, retaining legal counsel, complying with all legal steps in the investment process, and securing a well-drafted agreement. Even after a decision is reached in a dispute, enforcement of a judgment can still take years. The U.S. government recommends consulting with local counsel prior to investing to review legal options and appropriate contractual provisions for dispute resolution.
Intellectual Property Rights (IPR) Protection

Saudi Arabia has not appeared on the Special 301 Report’s Priority Watch List since April 2022. The Saudi Authority for Intellectual Property (SAIP) has taken steps to improve the IP ecosystem in Saudi Arabia, including publishing its IP enforcement procedures, increasing enforcement actions against counterfeits and pirated goods (including online content), establishing specialized IP enforcement courts with trained judges and expedited case timelines, and conducting strong IP awareness, outreach, and capacity building programs. SAIP has set up a centralized committee to coordinate IP enforcement actions across multiple authorities and trained IP specialists in 76 different authorities to increase government compliance with IP laws. Despite this progress, challenges remain for U.S. companies seeking to protect and enforce their IPR in Saudi Arabia. Stakeholders continue to raise concerns that the Saudi Food and Drug Authority (SFDA) granted marketing approvals for generic drugs without requiring the submission of data that meets the same requirements applied to the originator company, despite the period of protection granted to the originator drug by Saudi regulations. The SFDA has not granted such marketing approvals since October 2020.

Counterfeiting and Copyright Enforcement

The government has shown improvement in combatting the proliferation of counterfeit products in recent years with increased resources devoted to marketplace enforcement and stricter penalties for copyright and trademark violators. In 2024, Saudi Arabia established an Intellectual Property Prosecution office, which investigates and initiates criminal proceedings in IP rights infringement cases. SAIP publishes annual reports on seizures of counterfeit goods on their website; in 2023, it reported 253 shipments deemed counterfeit goods and the seizure of 3.5 million counterfeit products.

However, concerns remain regarding enforcement, due to weak coordination between SAIP and several U.S. companies, limited transparency in SAIP-led raids, and inadequate post-raid information sharing. The lack of transparency between SAIP and the private sector is troubling companies that complain of counterfeits entering the market.

Additionally, copyright enforcement remains limited due to an insufficient number of inspectors. Moreover, manufacturers of consumer goods and automotive spare parts are particularly concerned about the widespread availability of low-cost counterfeit products.

Regional Headquarters Initiative

In January 2024, Saudi Arabia’s Regional Headquarters Law took effect, requiring international firms to establish a regional headquarters (RHQ) in Saudi Arabia to qualify to bid for government contracts. Following Crown Prince Mohammed bin Salman Al Saud’s goal to transform Riyadh into one of the world’s top 10 cities, the initiative is paired with tax incentives, including a 30-year corporate tax holiday announced in December 2023. Despite clarifications and licensing of RHQs for dozens of firms, some ambiguity remains regarding regulatory enforcement and qualifying requirements for additional incentives.

Cross-Border Data Flows & Privacy

Saudi Arabia’s amended Personal Data Protection Law, effective from September 14, 2023, with a compliance grace period ending in September 2024, allows for limited cross-border data transfers. However, implementing regulations have not yet been fully issued, leaving uncertainty about permissible transfers and enforcement authority.