Saudi Arabia Update - August 2016

by Dentons


Legal developments

Labour and employment developments

Employee health insurance – inspections forthcoming

Joint inspections will be carried out by the Council of Cooperative Health Insurance (CCHI) and the Ministry of Labor and Social Development (MOL) to ensure that companies are providing health insurance to their employees and their families. This applies to both Saudis and non-Saudis and any company not following these rules will be fined and banned from hiring new employees. Employers will also be required to pay for the employee's retrospective coverage.

Companies doing business in Saudi Arabia should be sure that their employee health insurance obligations are up to date in light of possible inspections.

Arab News – 15 July 2016

Employee health insurance – suspension of certain health insurance companies' Services

The CCHI has decided to suspend the services of certain health insurance companies, and asked them not to issue insurance cards, for violating the agreements between them and the CCHI. Based on our review of the CCHI website, the suspended company is Amana Cooperative Insurance. However, the CCHI assured customers that this suspension would not affect individuals who obtained valid health insurance cards before the suspension.

Saudi Gazette – 17 July 2016

Taqat – online labor market test for block visas

As we have mentioned in previous updates, a project to provide opportunities for the Saudisation of jobs before opening the door for foreign recruitment was being developed.

On 1 August, the MOL introduced a new national labour portal and centralised database, Taqat. Employers are required to first advertise job roles on the portal for local hiring before applying for new block visas. If an employer is unable to find qualified Saudis within a stipulated time using the portal, only then will applications from foreign employees be processed.

The new labour portal is working and can be found at Employers and employees are required to create and log in to their accounts and can post job vacancies and look for candidates, or update their CVs and look for jobs.

Saudi Gazette – 26 July 2016

New visa fees

The MOL has revised the visa fees for visitors and expatriate employees in the Kingdom. In general, most fees have been increased, but first time Haj and Umrah pilgrims will be granted a free first entry visa for observance of religious duties.

The chart below specifies the new visa fees, as well as the visa fees that applied previously.

Visa Previous Fee Current Fee
First Entry
SAR 25 Chamber of commerce fee SAR 2,000 *waived for first time Haj and Umrah pilgrims
Single trip 2 month exit and re-entry SAR 200 up to 1 year SAR 200 and SAR 100 for each additional month
Multiple trips 3 month exit and re-entry SAR 500 up to 6 months SAR 500 and SAR 200 for each additional month
Multiple Entry 6 months SAR 500 SAR 3,000
1 year N/A SAR 5,000
2 years N/A SAR 8,000
Transit visa Differed country by country SAR 300
Seaport exit visa Free SAR 50

The new visa fees have been specified to affect all visas be they for work, visit, etc. However, these fees will not affect bilateral agreements which exist between the Kingdom and other countries. Officials hope that these new fees will also reduce the competition between Saudis and foreigners, as employers have to pay much higher visa fees for expats.

Arab News –11 August 2016

Employee benefits, housing and education allowances increase by 5 per cent

Over the past year, housing and education allowances and other employee benefits have risen by five per cent in Saudi Arabia amongst private employers. Commentators have predicted that these benefits will escalate by 10 per cent by 2020 due in part to increased privatisation of government sectors, which allows international companies to enter the market, thereby increasing competition amongst employers and contributing to a rise in employee loyalty and living standards.

Arab News – 17 July 2016

Disabled employees prioritised under Nitaqat system

As we have mentioned in previous updates, the MOL issued the Implementing Regulations (Regulations) of the amended Labor Law, which came into effect as of 22 April 2016. For our general overview of the April 2016 Regulations, click here.

According to the Regulations, the employment of disabled Saudi Arabian citizens is prioritised in the Nitaqat system as a way of encouraging private sector employment of disabled persons. This month the MOL warned companies not to discriminate against disabled employees in terms of wage compensation and job promotions on the basis that disabled employees shall enjoy the same rights and incentives as all employees.

Arab News – 20 July 2016

Ongoing Saudisation measures

Current events have seen an increase in the Saudi Arabian Government’s initiatives toward Saudisation of the economy, specifically with regard to the telecommunications and the automobile sectors.

In addition, plans are under way by the MOL to create more jobs within the health occupations in the Kingdom. A joint committee with the Ministry of Health will create a plan to implement Saudisation in this sector as well.

Arab News – 10 August 2016

Commercial law developments

GCC Unified Trademark Law published in Saudi Arabia

The Unified Trademark Law (UTL) was adopted at the GCC level by the GCC member states in 1987 and, since then, has existed solely as an unenforceable reference document. Then, beginning in 2014, some member-states began taking steps to implement the UTL domestically – Saudi Arabia was the first member state to do so by virtue of Royal Decree dated 26 May 2014.

However, Saudi Arabia’s Royal Decree adopting the UTL specified that the law would not come into effect until 90 days after its publication in the Saudi Official Gazette, Um Al-Qura, which occurred on 1 July 2016 after a lengthy delay. Thus, the UTL will come into effect as of 1 October 2016, and will replace the previous Trademark Law that was issued on 7 August 2002.

The main purpose of the UTL is to ensure uniform protection of trademarks across all GCC member-states. However, the UTL did not establish a unified filing / registration arrangement. Rather, as has previously been the case, registration within the member state in which the registrant seeks trademark protection is still required in order to enforce trademark rights therein.

Otherwise, the UTL covers several topics including trademarks registration procedure, protection period of trademarks, deregistration of trademarks and pledge and transfer of trademarks ownerships.

Um Al-Qura – 1 July 2016

Saudi-British Free trade agreement . . . forthcoming?

The Saudi British Joint Business Council (SBJBC) forum was held last month to encourage British investments in Saudi Arabia and bring about several initiatives to launch new investment projects in line with the Kingdom’s Vision 2030. Since Saudi Arabia and Britain are both witnessing economic restructuring in light of Vision 2030 and given Britain's decision to exit the European Union, the executive director of the SBJBC noted in an interview that both events represent an important opportunity to boost economic cooperation between the two countries, and thus a Saudi-British free trade agreement would likely be forthcoming in the near future.

Arab News – 23 July 2016

Capital market developments

Amendment of Rules for Foreign Investment in Listed Securities

This month, the amended Rules for Qualified Foreign Financial Institutions Investment in Listed Securities (the QFI Rules) were approved by the CMA after a 30-day consultation period. As we have described in previous Updates, the Capital Market Authority (CMA) has been studying the further liberalisation of the capital markets to foreign investment. In that regard, the amendments to the QFI Rules have the overall effect of decreasing the burdens on QFIs seeking to invest in Saudi Arabian securities, including:

  • decreasing the minimum assets-under-management requirement for QFI licensing from SAR 18,750,000,000 to SAR 3,750,000,000;
  • expanding potential QFI status to include governments and government bodies, in addition to financial institutions;
  • removing references to and requirements of clients of QFIs;
  • increasing the limitation on a QFI’s ownership in any single issuer from 5 per cent to 10 per cent;
  • increasing the limitation on QFIs’ ownership in the aggregate in any single issuer from 20 per cent to 49 per cent and
  • removing the restriction that limited QFIs’ ownership in the aggregate of all issuers listed on the market to 10 per cent.

The amended QFI Rules will come into effect on 4 September 2016. Lately, Saudi Arabian government bodies have increasingly, yet gradually, adopted policies intended to open the country’s economy to foreign investment.

Reports indicate that, despite the initial adoption of the QFI Rules on 4 May 2015, QFIs only own 1.03 per cent of the market. It will be interesting to see how QFIs react to increasing liberalization of Saudi Arabia’s capital markets, both now and in the future.

Saudi Gazette – 11 August 2016

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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