Saudi Arabia

From ACT Wiki
Flag of Saudi Arabia
System of government: monarchy
Population: 27.35 million
Currency: Saudi riyal (SAR)
FX regime: pegged to USD
GDP: US$753bn (2014 est)
IGTA member: no
FATF member: yes, through Gulf Cooperation Council (GCC) membership
Treasury association: ACT Middle East

Financial regulatory framework

Bank supervision

The Saudi Arabian Monetary Agency (SAMA) is responsible for bank supervision in Saudi Arabia. SAMA operates in accordance with the Charter of the Saudi Arabian Monetary Agency approved initially by Royal Decree No 30/4/1/1047 (1952) and amended by Royal Decree No 23 of 1957, which gave SAMA its autonomy.

Exchange controls

There are no exchange controls applied by Saudi Arabia.

Taxation framework

Corporate taxation

Only non-Saudis and non-Gulf Cooperation Council (GCC) citizens are liable to corporate income tax in Saudi Arabia. GCC-registered entities operating as branches in Saudi Arabia are also liable to income tax. Local companies are subject to zakat, an Islamic tax on net worth. In joint ventures, local shareholders’ and GCC shareholders’ attributable equity is subject to zakat, whilst the foreigner’s share of taxable income is subject to income tax. Zakat is assessed at 2.5% on the Zakat base of a Saudi shareholder. The income tax rate is a flat rate of 20%. However, companies carrying on activities in the oil or natural gas sectors are subject to rates of 85% and 30% tax respectively.

Capital gains

A 20% capital gains tax is imposed on the disposal of shares in a resident company. Capital gains on the disposal of shares traded on the Saudi stock exchange are exempt if the shares were acquired after 2004.

Taxation of dividends

Payments for rents, insurance premiums, management fees and royalties to non-resident companies are assessed for Saudi Arabian withholding taxes at rates of 5–20%, depending on the type of service. The domestic company making the payment is liable for taxes relating to these foreign payments.

Transfer pricing

There is no specific transfer pricing legislation.

Thin capitalisation

There are no prescribed thin capitalisation rules in Saudi Arabia. However, for tax purposes, the deduction of loan interest is limited to the lower of actual expense or interest income plus 50% of taxable income calculated before interest income and interest expense. Companies may be structured as they wish, but unless they meet specified criteria they are not eligible for investment incentives available under foreign capital investment regulations.

Indirect taxes

There are no consumption taxes in Saudi Arabia.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2015 (

Banking service provision

Saudi Arabia’s banking sector consists of 12 local banks and 12 branches of foreign banks. Together they operate a total network of 1,894 branches (2014). There are four fully Islamic commercial banks in Saudi Arabia but all commercial banks provide some form of Islamic products due to the high demand for Shariah-compliant products. Many of the leading international banks have established a presence in the sector, through branches and minority holdings in Saudi banks. International banks with minority holdings in local banks include HSBC (Saudi British Bank) and Crédit Agricole (Banque Saudi Fransi). In terms of both assets and capital the banking sector is dominated by the National Commercial Bank, the first bank to be established in Saudi Arabia and one of the largest banks in the whole Gulf region. The government of Saudi Arabia has controlled a majority stake in the business since 1999 and holds minority shares in many other Saudi banks. In recent years the banking sector in Saudi Arabia has enjoyed considerable growth and a surge in profitability. The effects of economic liberalisation and a boom in the Saudi economy have helped reverse the fortunes of what had previously been a largely underdeveloped market.

Clearing and payment systems

Clearing systems

All interbank payment and settlement systems in Saudi Arabia are managed and operated by SAMA. The Saudi Arabian Riyal Interbank Express (SARIE) is Saudi Arabia’s automated real-time gross settlement (RTGS) system. Card payments are processed by the Saudi Payments Network (SPAN). The SADAD Payment System is Saudi Arabia’s national electronic bill presentment and payment (EBPP) service provider, enabling the payment of bills through various channels offered by banks. Saudi Arabia’s automated clearing house (ACH) consists of three clearing houses, which act together as a national electronic interbank cheque clearing system. There are seven other clearing houses located across Saudi Arabia for the manual clearing of cheques.

  • SARIE – the SARIE RTGS system settles interbank transfers, customer credit transfers and direct debits. Transactions are settled electronically in real time with immediate finality, regardless of value. It is also used for the final settlement of participants’ net balances across Saudi Arabia’s other payments systems – ACH, SPAN and SADAD.

Both individual and batches of payments are settled by SARIE across participants’ bank accounts held at SAMA. There are currently 23 participants in the system in addition to SAMA. SARIE uses a proprietary electronic network to communicate with participant banks. Payment messages are based on SWIFT international standards.

  • SADAD – SADAD is Saudi Arabia’s EBPP system, providing a single platform that enables bank customers to make bill payments, such as repetitive utility bills or one-off fines.

Bill payments can be made via SADAD at bank branches, ATMs, online and through phone banking. Transactions are settled via SARIE at the end of each day. There are currently 16 banks and 141 billers participating in the system.

  • SPAN – SPAN is a national card payments processing network, processing all card payments in Saudi Arabia. Transactions are settled via SARIE with immediate finality on a same-day basis.

In addition to SAMA there are currently 17 participants in the system. A SPAN2 clearing system is currently being developed, which will be renamed MADA, to handle the rapidly increasing payment card market in Saudi Arabia.

  • ACH – Saudi Arabia’s ACH consists of three clearing houses acting together to process cheques as a national electronic interbank clearing system. The clearing houses are based at SAMA’s three largest branches in Riyadh, Jeddah and Dammam.

There are seven other clearing houses located across Saudi Arabia that process cheques manually, but all banks in Saudi Arabia participate in ACH. Cheques that are drawn on banks based in Riyadh, Jeddah and Dammam are cleared electronically and settled via ACH on a next-day basis. Cheques cleared elsewhere but settled by ACH take an extra day for transit. Cheques cleared manually usually take two to three working days to clear. Cheques in foreign currency can take up to 21 working days to clear. ACH cleared cheques are settled by SARIE.


The usage of payment cards has increased rapidly in Saudi Arabia in recent years. Debit cards account for the vast majority of issued cards. Although cheque usage has declined slightly in Saudi Arabia, the average value per cheque continues to rise. Direct debits are offered by most commercial banks and are usually used for utility bill payments. Automated electronic credit transfers are available but are mainly limited to business use. Paper-based credit transfers are also available.

  • Credit transfers – automated electronic credit transfers are offered in Saudi Arabia for high-value payments and for salary payments by companies and the government. Credit transfers have increased substantially in recent years, by 12.9% and 22% in value and volume between 2012 and 2013.
Credit transfers are mainly used by businesses. Paper-based credit transfers are also offered by banks.
  • Payment cards – payment card popularity has increased rapidly in Saudi Arabia in recent years, facilitated by an increase in ATM and point-of-sale (POS) terminals. There were 15,516 ATM terminals and 138,779 POS terminals in Saudi Arabia at the end of 2014.
There were 20.5 million debit cards and 1.8 million credit cards in Saudi Arabia at the end of 2014. The SPAN card is the debit card most commonly distributed by banks. Most credit cards are either MasterCard or Visa-branded.

Card payments are processed via SPAN, which connects banks to ATMs and POS terminals. SPAN also connects Saudi Arabia’s ATM networks to those in other GCC countries via the GCCNet ATM network.

  • Direct debits – SARIE operates Saudi Arabia’s interbank direct debit service. Direct debits are used for utility bills and other low-value recurring payments.
  • Cheques – cheques are used for commercial and retail payments in Saudi Arabia, with some employers using cheques for salary and pension payments.
They are processed both electronically and manually and as a result cheques have varying clearance times. Those processed in one of the ACH sites, in Riyadh, Jeddah and Dammam, are processed on a next-day basis. Manually cleared cheques are distributed among SAMA’s seven other branches and usually take two to three days. Cheques in foreign currency can take up to 21 days to clear.

Cash and bank account management

Interest-bearing accounts

Current accounts, saving accounts and time deposit accounts in Saudi Arabia can be interest bearing, subject to prior approval from the Saudi Arabian Monetary Agency (SAMA).

Account opening requirements

Residents in Saudi Arabia can hold local currency (SAR) accounts domestically and foreign currency accounts both domestically and abroad. Accounts in domestic currency are convertible into foreign currency. If from within the GCC, non-residents are permitted to open and maintain SAR and foreign currency accounts domestically for business and credit purposes, subject to the submission of certain documents and approval from SAMA. If from outside the GCC, non-resident non-banking companies are permitted to open domestic and foreign currency accounts, if they have projects or contracts in Saudi Arabia, subject to the recommendation of a rated bank, the submission of certain documents, permission from the Saudi Ministry of Commerce & Industry and approval from SAMA. However, accounts can be maintained only for the duration of the non-resident’s contract within Saudi Arabia. Signatories must have a residential licence in Saudi Arabia. Non-resident non-banking companies from outside the GCC that do not have contracts or projects in Saudi Arabia cannot open bank accounts without prior approval from SAMA.

Money laundering

Saudi Arabia has implemented anti-money laundering legislation (Anti-Money Laundering Law of 2003; Rules Governing Anti-Money Laundering and Combating Terrorist Financing of 2003, updated 2008; and Banking Control Law of 1966). The Saudi Arabian Monetary Agency (SAMA) has also issued a series of Financing Rules and Guidelines, updated 2012. Saudi Arabia is a member of the Gulf Co-operation Council (GCC). It is also a member of the Middle East and North Africa Financial Action Task Force (MENAFATF). Saudi Arabia has established a Financial Intelligence Unit (FIU), the Saudi Anti-Financial Crime Unit (SAFCU), within the Ministry of the Interior, which is a member of the Egmont Group. The FIU refers all matters requiring investigation to SAMA.

Supplied by BCL Burton Copeland ( Data as at January 2015.

Cash concentration

Cash concentration services are available in Saudi Arabia, with both zero balancing and target balancing available from cash management banks. It is permitted to use cash concentration arrangements between different legal entities only with prior SAMA approval.

Notional pooling

Notional pooling is permitted in Saudi Arabia. The participation of multiple legal entities requires SAMA approval.

Cross-border issues

Cross-border cash concentration and notional pooling techniques are impractical due to significant regulatory restrictions.

Electronic and internet banking

Electronic banking products are widely available in Saudi Arabia, although mainly utilised by businesses. There is currently no national bank-independent electronic banking standard. Internet banking is widely available in Saudi Arabia, although its use by individuals is limited due to low internet penetration levels. More than 18 million users were registered to using online banking in December 2014.

Liquidity management

Short-term investments

Short-term investments include:

  • Treasury bills – Saudi Arabia’s government issues Treasury bills (T-bills), with maturities ranging from one week to one year at weekly auctions.
  • Repurchase agreements (repos) – repos are offered by SAMA, with terms usually ranging from overnight to one week for up to 75% of a bank’s T-bill holdings. Repos are not permitted to be traded outside Saudi Arabia.
  • Term deposits – time deposits are offered with maturities of up to 12 months in SAR and foreign currencies.
  • Certificates of deposit (CDs) – CDs are not available in Saudi Arabia.
  • Commercial paper (CP) – CP is permitted in Saudi Arabia although it is not widely issued.

Short-term borrowing

Borrowing instruments include:

  • Overdrafts – overdrafts are a very popular short-term borrowing tool in Saudi Arabia.
  • Bank lines of credit and loans – formalised short-term loans are frequently used for commercial credit.
  • Commercial paper – CP is not frequently issued for borrowing, although it is permitted.


Saudi Arabian Monetary Agency

Ministry of Finance

Ministry of Commerce and Industry

Council of Saudi Chambers of Commerce

Saudi Arabian General Investment Authority

Saudi Stock Market

Capital Market Authority

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