In a recent announcement, the Saudi General Authority of Competition (GAC) has relaxed its previous financial threshold requirement to enhance the investment climate in the Kingdom of Saudi Arabia.
Previously, GAC required notification for all new economic concentrations if annule sales were equal or exceeded SAR200m. In today’s global economy, the financial threshold of SAR200m (approximately US$53m), meant that a high number of economic concentrations met the financial threshold even if only one member of the economic concentration had low revenues as long as the other party(ies) generated SAR200m or more in annule sales, irrespective of actual profits.
Whilst GAC will continue to maintain the same financial threshold, economic concentrations with SAR200m in annual global revenues would only be required to notify GAC if:
- The Saudi target of a foreign investor with no commercial operations in the Saudi market generates annual gross revenues of at least SAR40m; or
- A foreign investor with an existing market presence in the Kingdom of Saudi Arabia (Local nexus) and the Saudi target have combined annual gross revenues of at least SAR40m.
GAC has therefore moved away from its previous strict application of the SAR200m threshold for notifying GAC. Economic concentrations with global annual gross revenues meeting the SAR200m threshold would not have to notify GAC if:
- The foreign investor has no market presence in the Kingdom of Saudi Arabia and the target does not generate at least SAR40m in annual gross revenues; or
- The foreign investor with a Local nexus in the Saudi market and the Saudi target receive less than SAR40m in annual gross revenues.
Going forward, economic concentrations with at least SAR200m in revenues may be exempted from the notification requirements in transactions where Saudi sales fall below the new SAR40m threshold as described above. Foreign investors may welcome this news as this recent development could remove the stand-still period when forming a new economic concentration in the Kingdom of Saudi Arabia.
Overall, this recent development represents yet another example of the Kingdom of Saudi Arabia’s commitment to make the Saudi market more attractive for foreign investors. This news comes as the Kingdom of Saudi Arabia has totally revamped the Companies Law earlier this year (2023) to modernize corporate-governance standards in the Saudi market. Vision 2030 which has been the driving force behind these positive developments illustrates the Kingdom’s firm decision to create a business environment which is conducive to sustainable and sizable economic growth irrespective of its hydrocarbon revenues.