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Saudi Arabia, formally the Kingdom of Saudi Arabia (KSA), is a nation in Western Asia on the Arabian Peninsula. It is the fifth-biggest nation in Asia, the second-largest in the Arab world, and the largest in Western Asia, with a land area of around 2,150,000 km2 (830,000 sq mi). It is bounded on the west by the Red Sea, on the north by Jordan, Iraq, and Kuwait, on the east by the Persian Gulf, Qatar, and the United Arab Emirates, on the southeast by Oman, and on the south by Yemen. Bahrain is an island nation off the east coast of the Persian Gulf. Saudi Arabia and Egypt are separated by the Gulf of Aqaba in the northwest. Saudi Arabia is the only nation having coastlines on both the Red Sea and the Persian Gulf, and its landscape is mostly made up of dry desert, lowland, steppe, and mountains. Riyadh is the capital and biggest city. The nation is home to Mecca and Medina, Islam's two holiest cities.
Pre-Islamic Arabia, the land that comprises modern-day Saudi Arabia, was the home of various ancient societies and civilizations; Saudi Arabia's prehistory has some of the world's oldest signs of human activity. Islam, the world's second-largest religion, arose in what is now Saudi Arabia. The Islamic prophet Muhammad unified the inhabitants of Arabia and established a single Islamic religious state in the early seventh century. Following his death in 632, his adherents swiftly extended Muslim dominion outside Arabia, seizing vast and unprecedented swaths of land in a couple of decades (from the Iberian Peninsula in the west to portions of Central and South Asia in the east). Arab dynasties from modern-day Saudi Arabia established the Rashidun (632–661), Umayyad (661–750), Abbasid (750–1517), and Fatimid (909–1171) caliphates, among many others throughout Asia, Africa, and Europe.
Historically, Saudi Arabia was divided into four separate historical regions: Hejaz, Najd, and sections of Eastern Arabia (Al-Ahsa) and Southern Arabia ('Asir). King Abdulaziz established the Kingdom of Saudi Arabia in 1932. (known as Ibn Saud in the West). Through a series of victories that began in 1902 with the seizure of Riyadh, the ancestral seat of his family, the Al Saud, he unified the four areas into a single state. Since then, Saudi Arabia has been an absolute monarchy ruled by the king, the princes of the huge Al Saud royal family, and the country's traditional elites. Although the religious establishment's dominance has been considerably undermined in the 2010s, the ultraconservative Wahhabi theological movement within Sunni Islam has been characterized as a "predominant characteristic of Saudi society." Saudi Arabia maintains its Basic Law as a sovereign Arab Islamic state, with Islam as its official religion, Arabic as its official language, and Riyadh as its capital. Saudi Arabia is frequently referred to as "the Land of the Two Holy Mosques" in reference to the two holiest shrines in Islam, Al-Masjid al-Haram (in Mecca) and Al-Masjid an-Nabawi (in Medina).
Petroleum was found on March 3, 1938, and was quickly followed by many further discoveries in the Eastern Province. Since then, Saudi Arabia has risen to become the world's second-biggest oil producer (after the United States) and largest oil exporter, with the world's second-largest oil reserves and sixth-largest gas reserves. The kingdom is classified as a high-income economy by the World Bank, with a very high Human Development Index, and is the only Arab nation to be a member of the G20 major economies.
The kingdom spends 8% of its GDP on defense (the most in the world after Oman), making it the world's third largest military spender behind the US and China, as well as the world's top weapons importer from 2015 to 2019, getting half of all US arms shipments to the Middle East. According to the BICC, Saudi Arabia is the world's 28th most militarized nation, with the region's second-best military equipment, behind Israel. By the late 2010s, there have been repeated requests to restrict military supplies to Saudi Arabia, owing primarily to suspected war crimes in Yemen and, more recently, the killing of Jamal Khashoggi. The state has been chastised for a number of reasons, including its role in the Yemeni Civil War, alleged sponsorship of Islamic terrorism, and its poor human rights record, which has been characterized by the excessive and often extrajudicial use of capital punishment, failure to adopt adequate measures against human trafficking, state-sponsored discrimination against religious minorities and atheists, and antisemitism, as well as its strict interpretation of Sharia law.
Saudi Arabia is regarded as a regional as well as a medium power. The Saudi economy is the biggest in the Middle East and the world's eighteenth largest. Saudi Arabia also boasts one of the world's youngest populations, with over half of its 34.2 million people under the age of 25. Saudi Arabia is a member of the Gulf Cooperation Council, as well as the United Nations, the Organization of Islamic Cooperation, the Arab League, the Arab Air Carriers Organization, and OPEC.
Employees who have worked for one year are entitled to 15 days of paid vacation every year. This entitlement is enhanced to 21 days per year after ten years of service.
In addition, the employee is entitled to 10 days of unpaid leave each year, subject to the agreement of the employer.
Saudi Arabia recognizes three public holidays.
Sick leave in Saudi Arabia is 90 days per year, with the first 30 days paid in full and the following 60 days reduced to 75%. The employee must be able to present a medical certificate in order to take sick leave.
Employers with more than 20 workers are subject to sick leave legislation.
Maternity leave lasts for ten weeks and can start as early as four weeks before the projected delivery date. Maternity leave is compensated at 50% of regular salary if the lady has worked for the company for at least a year. Maternity leave is compensated at 100% of regular salary if the mother has worked for the company for at least three years.
If maternity leave is taken within the same year as full pay for maternity leave, a woman will not be paid for normal annual leave and will only be given 50 percent of annual leave pay while maternity leave is also at 50 percent of regular pay.
Fathers in Russia are entitled to 2 days of paid leave for the birth of a child.
There are no provisions in Saudi Arabian law regarding parental leave.
Marriage leave – 3 days’ unpaid leave
Death of a family member – 2 days’ paid leave
In Saudi Arabia, employers must provide a valid reason for terminating an employee; otherwise, the company may be obliged to pay compensation established by the labor commission or to reinstate the employee.
If the termination is initiated by the employee, the employee's final earnings must be paid immediately.
For employees on monthly employment contracts, the notice period is 30 days; for employees on other types of employment contracts, the notice period is 15 days.
Probationary periods usually last 90 days in Saudi Arabia.
Severance pay is calculated differently depending on the length of employment and the manner in which the employment relationship ends. If the employer initiates the termination or an employee resigns due to marriage or childbirth, military service, or force majeure, the employee is entitled to half a month's salary for the first five years of employment and one month's salary for each subsequent year. If the employee resigns, they are entitled to one-third of the aforementioned compensation for the first two years of service and two-thirds for each year thereafter. The employee is eligible for the full benefit after ten years of service. To be eligible, the employee must have provided a written notice of at least 30 days. There are, however, exceptions to the rule regarding mandatory severance. These include instances in which an employer assaults their employer or supervisor, when an employee violates the terms of their employment contract despite being warned in writing, when the employee acts negligently or with the intent to cause harm to the employer, when the employee is on probation, when the employee is absent from work for more than 20 days in a year or 10 consecutive days, and when the employee is on diversion.
The standard workweek is 48 hours long and eight hours long each day. However, Muslims' working hours are reduced to 36 hours per week and six hours per day during the month of Ramadan. Female employees are not permitted to work evening shifts.
On Fridays, the employee is entitled to 24 hours of rest. A rest period of at least half an hour per day is required during the workday, provided the employee does not work more than five consecutive hours without a break. Additionally, the employee is entitled to additional breaks for prayer and lunch that are not included in the half-hour rest period.
Daily working hours are limited to 11 hours. Overtime pay is compensated at 150 percent of the basic rate for hours worked beyond the regular working hours and during holidays.
Saudi Arabia does not have a minimum salary for the private sector, however as of April 2021, public sector workers must earn at least 4,000 Saudi Arabian Riyal (SAR) each month.
Saudi nationals have access to free medical and hospital treatment via the state system. Supplemental health insurance is usually given as a benefit to expatriate workers.
Supplemental health insurance, vacation tickets home, school costs, retirement plans, mobile phones, housing allowances, and transit allowances are all typical perks.
Non-Saudi investors are generally subject to income tax in Saudi Arabia. In most instances, Saudi citizen investors (as well as residents of GCC nations considered Saudi citizens for Saudi tax reasons) are required to pay Zakat, an Islamic assessment. When a business is held by both Saudi and non-Saudi interests, the part of taxable revenue due to the non-Saudi interest is subject to income tax, while the Saudi component is used to calculate Zakat.
Income tax is levied at a rate of 20% on net adjusted earnings. The prevalence of WHT ranges between 5% and 20%. Zakat is levied at a rate of 2.5 percent on the company's Zakat basis. Zakat base is the entity's net value as determined for Zakat purposes.
It should be noted that, although the standard income tax rate is 20%, income from the following two activities is taxed at a separate rate:
(1) Income from oil and hydrocarbon production is subject to tax at a rate ranging from 50% to 85%.
(2) The tax base of a person who works in natural gas investment should be independent of the tax base relating to other activities of this person.
If an individual's earnings are solely from work in Saudi Arabia, no income tax is levied.
Non-employment income is taxed as if it were earned by a corporation or a fixed business (PE). A non-resident individual with no PE who earns income in Saudi Arabia is subject to withholding tax (WHT) rules.
VAT is levied at a rate of 5% on the majority of products and services, with certain exceptions. The normal VAT rate was raised to 15% by the government on July 1, 2020.
The Excise Tax Law went into force in Saudi Arabia on June 11, 2017, with only tobacco products (at 100% ), soft drinks (at 50% ), and energy drinks (at 100% ) chosen as items subject to the excise tax in Saudi Arabia.
Manufacturers and importers of excisable products must register with the GAZT in order to comply with the Saudi Arabian Excise Tax Law. Businesses that qualify to be subject to the Excise Tax Law but fail to register and comply with the GAZT's instructions will be deemed tax evaders and will face fines.
A third-party national must be sponsored by an employer in order for an employee to get a work visa in Saudi Arabia. The employer must be registered with the Ministry of Interior, and a file containing all information on the employer's foreign workers is opened. Saudi Arabia's quota system and nationalization program might make hiring a foreign national difficult and time-consuming. The applicable processes include a consular process in the home country, followed by many post-arrival formalities before ultimate resident rights are granted.
When a business traveler receives a government-approved letter of invitation from a sponsor in Saudi Arabia, they normally apply for a Business Visit Visa at a Saudi consular post. Business Visit Visas are typically valid for three months (single-entry), 12 months (multiple-entry), or up to five years (multiple-entry) for nationals of countries with whom Saudi Arabia has signed bilateral visa arrangements. The maximum permissible stay under a single-entry visa for three and six months is 30 days; for visas with other validity periods, the maximum allowable stay is 90 days.
In Saudi Arabia, there is no longer a short-term employment option; for long-term labor, foreign nationals may apply for a Work Permit and Resident ID Card, which is valid for up to one year with the potential of extension.
Citizens of Bahrain, the United Arab Emirates, Kuwait, and Oman are exempt. Citizens of these nations may enter with their passports.
Saudi Arabia's date system is based on the Islamic calendar known as Hijri rather than the Gregorian calendar. As a result, all contracts and papers should be dated using the Hijri calendar. Employers that establish a new firm or branch in the Kingdom must provide the following documents to the labor office:
Name, nature, address, contact information, and business center A copy of the commercial license to do business with the registration number and permit to participate in business
The number of workers
Employer's name
Any additional documentation required by the labor ministry
Employment contracts should be in writing and in Arabic. If the employee is a foreigner, a translated copy of the Arabic contract should be included. In Saudi Arabia, there are three kinds of employment contracts: definite term, temporary term, and indeterminate term. The definite-term contract ends either on the expiry date or upon completion of the task. It may only be renewed three times for the same term. It automatically becomes an indefinite-term contract when the third renewal expires or when the employee continues to work after the contract expires without the employer extending the contract. Temporary contracts are for defined hours per day or days per week and should not last more than 90 days. The indefinite contract has no end date and may be cancelled at any time by any party.
Non-Saudi citizens' employment contracts are regarded to be fixed-term. If the employment contract does not state the term, it is assumed to be the same as the period of the workers' resident visa and work permit.
Employers must have at least 75% of their workforce comprised of Saudi citizens.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Saudi Riyal
Before establishing your Saudi Arabia subsidiary, you should think about a few things that will influence where you acquire office space and the procedure you use. Consider your sector, the sort of company you intend to run, and any current trade agreements or partnerships that you must uphold. We propose using a Saudi agent or distributor to conduct direct sales to the private sector outside the nation since the legislation prohibits a foreign company from acting as a commission agency.
Saudi Arabia is divided into four regions:
1. Hejaz
2. Najd
3. Parts of Eastern Arabia (Al-Ahsa)
4. Southern Arabia (‘Asir)
Rules, consumers, and laws may vary from one place to the next. It is important to do preliminary research on the location in which you choose to establish your Saudi Arabia subsidiary in order to make the best decision for your business.
To form a subsidiary, you must first reserve a business name with the Ministry of Commerce and Industry, which may be done online. You must also file articles of incorporation/association with the Ministry. The items will then be notarized with a stamp by the notary public.
If you plan to expand to Saudi Arabia, you must get familiar with the country's subsidiary legislation or engage someone to assist you with the incorporation procedure. According to the legislation, you must first create a bank account in Saudi Arabia and then apply for a company license with the Riyadh municipality. After deciding on a physical site in one of the four areas, you must legally register your business address with the "Wasel" post office.
Fees are required for some aspects of the Saudi Arabia subsidiary formation procedure, including:
1. The summary of the articles of incorporation is published (SAR 1,150)
2. Creating a formal corporate seal (SAR 50)
3. Chamber of Commerce Membership (SAR 2,000)
Saudi Arabia subsidiary regulations also need some actions that are free of charge. After paying for the summary of your articles of incorporation to be published, you must submit the paperwork to the Ministry of Commerce and Industry to get a Certificate of Registration. Register with the Ministry of Labor, the General Organization of Social Insurance, and the Department of Zakat to finish the procedure.
