Over the past several years, the Kingdom of Saudi Arabia has undergone significant developments in its legislative and regulatory investment environment, in line with the objectives of Saudi Vision 2030 and the National Investment Strategy, further enhancing the Kingdom’s appeal to local and foreign investors.
One of the most significant developments is the issuance of the Investment Law, which replaced the previous Foreign Investment Law and came into force on February 12, 2025, following the expiration of 180 days from its publication in the Official Gazette. The new law is not limited to regulating foreign investment; rather, it establishes a unified framework applicable to both local and foreign investors.
The law forms part of the Kingdom’s efforts to build a more competitive and transparent investment environment by facilitating the establishment of investments, protecting investors’ rights, regulating registration procedures, and providing alternative means of dispute resolution.
In this article, we explore the key aspects investors should know about the New Investment System in Saudi Arabia, including what has changed, investors’ rights and obligations, and how procedures may vary depending on the nature of the business activity.
What Is the New Investment System in Saudi Arabia?
The Investment Law is the legal framework governing investment in the Kingdom. It was redesigned to replace the Foreign Investment Law issued under Royal Decree No. (M/1), dated 5/1/1421 AH.
The Ministry of Investment explains that the updated law was developed as an integrated framework aligned with Saudi Vision 2030, the objectives of the National Investment Strategy, and international best practices, with a focus on enhancing the competitiveness of the investment environment, increasing the private sector’s contribution to the economy, and protecting investors’ rights.
One of the most significant changes introduced by the law is the transition from a framework primarily focused on foreign investment to a broader system that addresses both local and foreign investors under a single legal framework.
This shift is significant in practice because it reflects an effort to establish more consistent investment rules while emphasizing equal treatment of local and foreign investors under comparable circumstances.
When Did the New Investment System Take Effect?
The Investment Law was published in the Official Gazette on August 16, 2024, and provides that it would take effect 180 days after its publication.
The law came into force on February 12, 2025, repealing the previous Foreign Investment Law issued under Royal Decree No. (M/1), dated 5/1/1421 AH, as well as any provisions that conflict with it.
Accordingly, when reviewing the current legal requirements for investing in Saudi Arabia, investors should not rely solely on the former procedures applicable under the Foreign Investment Law. Instead, they should refer to the current law and the regulations and procedures relevant to their specific business activity.
Who Is Considered an Investor Under the New Investment System?
One of the key changes introduced by the law is the broader definition of an investor.
The law defines an investor as any local or foreign investor. A local investor is defined as a natural or legal person who makes an investment and holds Saudi nationality, while a foreign investor is a natural or legal person who makes an investment and does not qualify as a local investor under the provisions of the law.
This means that the law is no longer focused solely on regulating foreign investment, but instead serves as a broader framework governing investment generally.
For investors, understanding their legal status, the nature of the business activity, and the entity through which the investment will be conducted is an essential step before beginning the relevant procedures.
What Does “Investment” Mean Under the New System?
The law defines investment as the use of capital to establish, expand, develop, finance, partially or fully own, or manage an investment project in the Kingdom for the purpose of achieving an economic benefit.
The definition of capital has also become broader and may include, for example:
- Shares and ownership interests in companies.
- Contractual rights.
- Fixed and movable assets.
- Intellectual property rights.
- Rights granted under licenses, permits, or similar instruments.
By contrast, the law excludes loans, bonds, financing sukuk, and public and private debt instruments from the definition of capital.
These definitions are important when determining whether a particular transaction falls within the scope of the law and the nature of the legal protections associated with it.
What Are the Main Objectives of the New Investment System?
The law sets out a number of objectives that reflect the Kingdom’s approach to developing its investment environment, including:
1. Facilitating the Establishment of Investments
The law seeks to facilitate the establishment of investments and related matters, including asset ownership, exit, and liquidation.
2. Protecting Investors’ Rights
The law emphasizes protecting and strengthening investors’ rights, helping provide a clearer and more stable investment environment.
3. Equal Treatment of Local and Foreign Investors
One of the key principles established by the law is equal treatment of local and foreign investors under comparable circumstances.
4. Providing Transparent and Fair Procedures
The law aims to provide effective, transparent, and fair procedures for investors and their investments.
5. Supporting Competition and Equal Opportunities
The law supports the principles of competitive neutrality, fairness, and equal opportunities in the treatment of investments.
These objectives align with the Kingdom’s broader efforts to strengthen its investment environment and enhance its ability to attract local and foreign investment.
What Are the Key Changes Introduced by the New Investment System?
The new system introduces several significant changes that investors should be aware of, including:
First: Transitioning from Licensing to Registration
One of the most significant changes highlighted by the Ministry of Investment is that the new system replaced licensing procedures with a registration system for foreign investors, with the aim of providing greater flexibility in investment procedures.
This does not mean that investors can conduct any business activity without complying with other legal requirements. Depending on the nature of the activity, licenses, permits, or approvals from the relevant authorities may still be required.
Therefore, it is important to distinguish between investment registration and the sector-specific licenses required to conduct a particular business activity.
Second: Covering Both Local and Foreign Investors
The system now applies to both local and foreign investors under a unified framework, with equal treatment provided under comparable circumstances.
Third: Regulating Investment Incentives
The law introduced the concept of investment incentives, allowing the competent authority to grant investors benefits, facilities, or other incentives based on objective, specific, and fair eligibility criteria and in accordance with applicable laws and regulations.
Fourth: Providing Alternative Dispute Resolution Mechanisms
An important development is that the law allows investors to use alternative dispute resolution mechanisms, including arbitration, mediation, and conciliation, in accordance with the relevant legal provisions.
This gives investors additional options when disputes arise instead of limiting all disputes to traditional court proceedings.
Can a Foreign Investor Invest in Any Business Activity in Saudi Arabia?
As a general principle, the system provides for freedom to invest in any sector or activity open to investment, subject to excluded activities and applicable laws and regulations.
There is a list of activities that are excluded or restricted for foreign investors. The competent authority is responsible for issuing and updating the list, while the Ministry of Investment publishes it.
If a foreign investor wishes to invest in an activity included on the excluded activities list, the investor must submit an application to the Ministry of Investment for approval. The Ministry then refers the application to the competent authority for review.
Changes in ownership of investments in certain restricted activities may also require prior approval under the law.
Therefore, the first practical step for a foreign investor should not necessarily be to immediately establish a company, but rather to verify the nature and classification of the activity and its specific requirements.
What Are the Procedures for Foreign Investment in Saudi Arabia?
According to information published by the Ministry of Investment, a foreign investor must register with the Ministry before making an investment, in accordance with the applicable procedures and requirements.
Once registration is completed, the investor can proceed with other steps, such as obtaining a Commercial Registration and securing the licenses required from the relevant authorities based on the nature of the activity.
The Ministry of Investment also provides the ability to submit registration applications electronically. Its frequently asked questions indicate that registration applications can be submitted through the electronic services platform without the need to visit the Ministry’s offices.
In practice, the process can generally be outlined as follows:
Identifying the business activity
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Reviewing requirements and restrictions
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Determining the appropriate legal structure for the investment
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Submitting an investment registration application, where applicable
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Completing entity and Commercial Registration procedures
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Obtaining the required sector-specific licenses and permits
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Commencing the business activity in accordance with applicable legal requirements
The actual process and required documents may vary depending on the investor’s nationality, the type of entity, the business activity, and the sector.
Does a Foreign Investor Need a Saudi Partner?
This is one of the most common questions investors ask when considering entering the Saudi market. However, it should not be approached with a single rule that applies to every business activity.
The system is based on the principle of investment freedom, subject to a list of excluded or restricted activities. Certain activities may also be subject to specific sectoral laws and requirements.
Accordingly, whether an investment requires a local partner or allows full foreign ownership depends on the business activity, sector, entity, and specific legal requirements applicable to it.
The Ministry of Investment’s published FAQs indicate that different registration pathways may apply depending on the nature of the activity, including available and restricted activities.
Investors should therefore avoid making decisions regarding ownership structure or partnerships before conducting a legal assessment of the business activity.
What Are an Investor’s Rights in Saudi Arabia?
The Investment Law establishes a number of fundamental rights for investors, including:
Equal Treatment
Investors have the right to equal treatment with other investors, including equal treatment of local and foreign investors under comparable circumstances.
Fair and Equitable Treatment
The law provides investors with the right to fair and equitable treatment.
Protection Against Expropriation
An investment may not be wholly or partially confiscated except pursuant to a final judicial ruling.
Protection Against Compulsory Acquisition
An investment may not be directly or indirectly expropriated except in the public interest, in accordance with applicable legal procedures, and against fair compensation.
These provisions provide an important framework for investor protection, while the exercise of any right or claim for protection remains subject to the applicable laws, conditions, and procedures.
What Are an Investor’s Obligations Under the Investment System?
While the law grants investors certain rights, it also establishes clear obligations.
One of the key obligations is compliance with all laws and regulations applicable in the Kingdom, in addition to obligations arising under international agreements in force to which the Kingdom is a party.
Accordingly, investment registration does not exempt an investor from complying with other applicable laws and regulations.
Depending on its activity, a project may be subject to laws and regulations relating to companies, commerce, labor, taxes and Zakat, data protection, competition, the environment, sector-specific licensing, and other requirements.
Therefore, properly establishing an investment requires consideration of the broader legal and regulatory framework, rather than the Investment Law alone.
What Is the Role of the Ministry of Investment Under the New System?
The law provides a more structured framework for the role of the Ministry of Investment, including the establishment of a National Register of Investors containing information and data relating to their investments. The Ministry is responsible for managing, updating, and maintaining the confidentiality of the register.
Through its comprehensive service center, the Ministry can also receive investors’ applications for the regulatory approvals required to conduct investment activities, including certain licenses and permits, while coordinating with the relevant authorities.
This is intended to facilitate the investor journey and reduce fragmentation between different authorities when completing the required procedures.
What Is the National Register of Investors?
The National Register is a register established by the Ministry of Investment containing information and data relating to the investments of local and foreign investors.
The Ministry is responsible for managing and updating the register and maintaining its confidentiality.
The National Register is distinct from the Commercial Registration. A Commercial Registration relates to the business entity and its registration procedures with the relevant authority, while the National Register of Investors forms part of the investment regulatory framework.
This distinction is important for foreign investors when planning the required procedures, as investment registration does not eliminate the need to complete other legal requirements necessary to conduct the business activity.
Are Certain Activities Excluded From Foreign Investment?
Yes. Although the system follows the principle of investment freedom, certain activities are excluded or subject to restrictions for foreign investors.
The competent authority issues and updates the list of excluded activities, while the Ministry of Investment publishes it. If a foreign investor wishes to conduct an activity included on the list, the investor must apply for approval before investing in accordance with the applicable procedures.
Investors should therefore review the current list of excluded activities before making any investment decision, as the lists and requirements may be updated.
Does the Investment System Provide Incentives for Investors?
Yes. The law provides for the possibility of granting investment incentives to investors.
However, an investment incentive is not an automatic entitlement for every project. Incentives are granted by the competent authority based on objective, specific, and fair eligibility criteria, with the relevant regulations establishing the applicable provisions.
Accordingly, investors should not base a feasibility study or investment decision on the assumption that a particular incentive will be granted before confirming eligibility requirements and obtaining approval from the competent authority.
How Are Investment Disputes Resolved?
One of the important features of the New Investment System is that it allows investors to use alternative dispute resolution mechanisms, such as arbitration, mediation, and conciliation, in accordance with the relevant legal provisions.
This is particularly important for commercial investments involving long-term contracts, partnerships, or transactions between multiple parties.
In practice, the dispute resolution mechanism should be considered when drafting investment contracts from the outset, rather than only after a dispute arises.
A clear clause addressing the applicable law, dispute resolution mechanism, and competent authority or arbitration, where agreed upon, can be important if a future dispute arises.
What Does the New System Mean for Foreign Investors?
For foreign investors, the new system represents a significant shift in how investment is regulated in Saudi Arabia.
Rather than relying on a separate framework focused on foreign investment, Saudi Arabia now has a comprehensive investment system covering both local and foreign investors, emphasizing equal treatment under comparable circumstances, providing legal protection for investments, developing registration procedures, and offering alternative dispute resolution mechanisms.
The system also does not operate independently from the broader legal and regulatory framework. Therefore, foreign investors should consider several factors before starting a project, including:
- The nature of the business activity.
- Whether foreign investment is permitted in the activity.
- Registration requirements.
- The appropriate legal structure.
- Licensing requirements.
- Ownership and partnership considerations.
- Contracts and agreements.
- Commercial and regulatory obligations.
- Relevant financial and tax requirements.
- Protection of investment rights and interests.
- Dispute resolution mechanisms.
Why Does an Investor Need Legal Advice Before Starting an Investment?
Some investors may believe that investment procedures are limited to establishing a company and obtaining a Commercial Registration. However, the legal framework surrounding an investment is much broader.
Choosing an inappropriate business activity or structure, signing a contract without legal review, or failing to understand activity-specific restrictions may lead to legal or financial issues at later stages.
Early legal advice can therefore be an important way to understand the appropriate path before investing time and money in procedures that may later need to be changed.
A specialized legal advisor can assist an investor in assessing:
Investment Activity
Is the activity open to foreign investors? Are prior approvals required?
Investment Structure
What is the appropriate legal structure for the project?
Contracts
Do the proposed contracts protect the investor’s rights and clearly define the parties’ obligations?
Partnerships
Is there a partnership? What are the rights and obligations of each party?
Legal Risks
What are the key legal and regulatory risks that should be considered before starting the business activity?
Disputes
What is the most appropriate mechanism for resolving potential future disputes?
How Can the Law Office of Abdulsalam bin Dafir Al-Qarni Help Investors?
The Law Office of Lawyer and Legal Consultant Abdulsalam bin Dafir Al-Qarni provides legal services to investors and businesses, including legal and technical consultations relating to investment, assistance with relevant procedures, drafting and reviewing contracts and agreements, notarization, representation before competent authorities, and legal support in mergers and acquisitions and other investment-related matters.
Foreign investment services provided by the office include:
- Providing legal and technical advice to investors.
- Assessing suitable legal options for investments.
- Assisting with obtaining the necessary licenses, registrations, and certificates.
- Notarizing transactions and authenticating relevant procedures.
- Providing legal support for mergers and acquisitions.
- Representing investors before competent authorities and relevant parties.
- Drafting, reviewing, and notarizing contracts and agreements.
These services are particularly valuable for investors seeking to enter the Saudi market for the first time and who need to understand the legal requirements before making investment decisions.
Frequently Asked Questions About the New Investment System in Saudi Arabia
Has the New Investment System Replaced the Foreign Investment Law?
Yes. The New Investment System replaced the previous Foreign Investment Law issued under Royal Decree No. (M/1), dated 5/1/1421 AH, and the new system now serves as the framework governing investment in the Kingdom within its scope and provisions.
Is the New System Only for Foreign Investors?
No. One of the key changes is that the system applies to both local and foreign investors, with equal treatment provided under comparable circumstances.
Does a Foreign Investor Need to Register Before Investing?
Yes. The law provides that a foreign investor must register with the Ministry of Investment before making an investment, in accordance with the applicable regulations, with an exception for investments in securities subject to the Capital Market Law.
Can a Foreign Investor Invest in All Business Activities?
The general principle is freedom to invest in activities that are open to investment, subject to excluded or restricted activities that may require prior approvals. Therefore, the relevant business activity should be verified before starting the procedures.
Does the System Protect an Investor’s Ownership?
Yes. The system includes provisions relating to investment protection, including protection against confiscation except pursuant to a final judicial ruling, and protection against direct or indirect expropriation except in the public interest, in accordance with applicable legal procedures and against fair compensation.
In conclusion, the New Investment System in Saudi Arabia represents a significant development in the Kingdom’s investment environment. It not only replaced the previous Foreign Investment Law, but also established a broader framework covering both local and foreign investors while emphasizing investment freedom, equal treatment, investor protection, streamlined procedures, and alternative dispute resolution mechanisms.
At the same time, the broader framework does not mean that all investments follow the same procedures. The nature of the business activity, sector, ownership structure, legal entity, and required licenses may directly affect the appropriate legal process for the project.
Therefore, if you are planning to start a new investment in Saudi Arabia, establish a company, enter the Saudi market as a foreign investor, or review an investment contract or structure, it is advisable to assess the legal aspects of the project before beginning the relevant procedures.
You can contact the Law Office of Lawyer and Legal Consultant Abdulsalam bin Dafir Al-Qarni for legal consultation, assessment of your investment requirements, and guidance on the legal services and procedures appropriate for your project.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice for any specific investment matter. Requirements may vary depending on the business activity, sector, entity, investor nationality, and relevant authorities. Investors should review the laws, regulations, and procedures applicable at the time of submitting their applications.
