Foreign companies are allowed to register solely foreign owned subsidiaries in Saudi Arabia in the name of foreign investment. Chinese companies, however, after having registered and obtained investment permit, are required to present "Qualification Certificate", a classification certificate granted by the Ministry of Municipal & Rural Affairs for submitting tender and contracting projects. Procedures for applying "Qualification Certificate" are complicated. Performance of the parental company is not recognized and reexamination is required for the subsidiary, which means that even if registered, a Chinese subsidiary is not able to start normal business, or even if approved after the examination, a Chinese subsidiary is not able to obtain a higher level of qualification because the performance of the parental company is not taken into account. This practice has seriously affected the business of Chinese companies. China expresses concern over the justification of this measure and requests that the Saudi government give Chinese companies the same treatment as companies from other countries.
As there is a lack of coordination among different ministries of the Saudi government, foreign companies would find their registration application rejected by the Ministry of Commerce & Industry on the grounds that the business scope they apply for is not open to foreigners even if they have obtained investment permit from the SAGIA. As a result, their registered capital is frozen, normal business impossible to start and heavy losses incurred.
Moreover, according to relevant regulations of the Saudi government, paying up the registered capital is a necessary condition for registering a company. When the legal person of a company is to open an account in a local bank, long-term residence permit must be presented, which is not available until the company has been registered. The lack of coordination among the three links has seriously affected the investment by Chinese companies in Saudi Arabia. China expresses concerns about the obstacles to registration Chinese companies have encountered and hopes this issue could be settled properly by the Saudi government.
In Saudi Arabia, Saudis, foreign persons, or businesses jointly owned by Saudis and foreign persons must obtain tax-paying certificates from the General Bureau of Zakat and Income Tax. Personal wages or salaries are not taxable. Saudis or GCC nationals are only subject to Zakat and enjoy exemption from income tax, while foreign companies or individuals are only subject to income tax and enjoy exemption from Zakat. Domestic companies in Saudi Arabia pay a 2 percent Zakat. Although income tax for foreign companies has lowered from 45 percent to 20 percent, it is still considerably higher than that for domestic companies. China expresses concern that Chinese companies haven't been granted national treatment in Saudi Arabia, and asks the Saudi government to narrow the difference in tax rates applicable to Chinese companies and that to Saudi domestic companies.
