Rectifying the business status - Saudi Ministry launches corrective period for anti-concealment Law until August 23, 2021

Rectifying the business status - Saudi Ministry launches corrective period for anti-concealment Law until August 23, 2021

Businesses in the Kingdom currently engaged in "commercial concealment" are given six options to correct their status until August 23. According to the Regulation for Correction of Conditions for Violators of the Anti-Concealment Law, the Ministry of Commerce provides an opportunity for Saudis and non-Saudis who are practitioners of economic activities to rectify their conditions. It is possible to apply to correct the status until August 23, 2021. According to the regulations, those whose situation is corrected shall be exempted from the penalties prescribed in the anti-concealment Law and other fines resulting from the crime and its proceeds are subject to correction and paying the income tax retroactively.

Violations of the Anti-Concealment Law (Royal Decree No. M/4 dated 1/1/1442H (corresponding to 20/8/2020), and its implementing regulations; Ministerial Resolution No. 00479 dated 20/7/1442H (corresponding to 4/3/2021AD)) include:

 

¾   A non-Saudi invests in a corporate entity with restricted activities to wholly Saudi-owned companies without disclosing such foreigner ownership/investment to the Saudi government.

¾   A foreign business establishing commercial operations in Saudi without first obtaining a foreign investment license; and

¾   Similar "fronting arrangements" such as nominee arrangements whereby the ultimate beneficiary is a non-Saudi national who did not obtain a foreign investment license to carry out the business in Saudi Arabia but does through their Saudi partner who legally holds all of the shares in the business.

 

Options to correct status

 

Subject to fulfilling the regulatory requirements, the following six options are available for companies and individuals to correct their legal status.

 

1. Establishing partnership in the enterprise between the Saudi and non-Saudi parties

2. Registering the ownership of the enterprise in the name of the non-Saudi party

3. The Saudi continues to practice the economic activity by adding a new partner (Saudi or licensed foreign investor)

4. The Saudi party disposes of the enterprise by sale, assignment, or dissolution

5. The non-Saudi party obtains the Saudi premium residency by the Premium Residency Law and proceeds to rectify their status

6. The non-Saudi leaves the Kingdom permanently through final exit visa after providing the required documents to the Ministry of Commerce

 

How to correct status

 

Those wishing to correct the situation of their businesses can apply electronically to the Ministry of Commerce by submitting a disclosure form and providing the requested documents and information, depending on the corrective action is chosen from the six options outlined above.

 

After the rectification request has been submitted, the Ministry will review the case and notify the applicant to complete the rectification procedures within 90 days from the date of notification. If the request is still incomplete after 90 days, the applicant may be granted an additional 180 days to complete the corrective measures.

 

Documents required for correcting the status

1. A copy of the commercial registration of the national entity, and a copy of the national identity, if one of the partners is a natural person holding the nationality of one of the GCC countries.

2. A copy of Iqama residence for the new partner.

3. A copy of the General Organization for Social Insurance (GOSI), stating the total number of the establishment's employment.

4. Financial statements of the last financial year of the applicant company and certified by a certified auditor and deposited with the Qawaem program.

5. A letter of no objection from the Saudi sponsor/ employer.

 

Service Rules and Restrictions

1. The entity requesting correction from the National Program for Combating Commercial Concealment shall comply with the total percentage of Saudi (partner/partners) according to the type of activity and to achieve the minimum capital according to the minimum limits of the kind of activity gradually over a maximum period of three years of license issuance.

2. A review completion on the application submitted to the platform of the National Program for Combating Commercial Concealment.

3. The entity requesting the correction has 50 or higher workers, or the establishment's revenues for the last year are 10 million riyals or higher.

4. The commercial registration of the applicant entity shall be issued before the correction campaign period.

5. The foreign partner shall have an Iqama residence before the correction campaign period and work in the applicant entity.

6. If the applicant is a resident of the Kingdom, the Saudi sponsor/ employer should submit a letter of no objection.

7. It is unnecessary to submit proof of international presence in activities that require presence in several countries for this service.

 

After August 23, 2021, companies not complying with the Anti-Concealment Law may be subject to harsh penalties. Violators may be subject to imprisonment of up to five years and a fine of not more than five million Saudi riyals, in addition to payment of all Zakat, taxes, and charges, as well as deportation for non-Saudis and the prevention of practicing a commercial activity in the Kingdom for up to five years for Saudi nationals.

 

The government agencies participating in the National Anti-Commercial Concealment Program affirmed their full readiness to support all applicants to request a correction to be regular investors following the options stipulated in the Regulations for Correcting the Status of Violators of the Anti-Concealment Law, and that there won't be any leniency in the application of heavy penalties specified by the Law after the end of the corrective period.

 

A person arrested by the Ministry for committing a crime or violating provisions of the Law before submitting a request to rectify his status, or whoever was referred to the Public Prosecution or the competent court, will not be given an exemption from the penalties.

 

We are available to provide you with further clarification. We can assist you in rectifying your business status and put in place associated agreements and contracts to bring your businesses in line with Saudi Law.

 

Please get in touch with us at:  info@khazindarlaw.com

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