Starting a Business in Saudi Arabia

Run by the Al Saud royal family, Saudi Arabia sits on twenty five percent of the world’s oil reserves and has a capacity of producing nearly ten million barrels per day. It is the number one oil producer in the world and has a strong trade partner in the US and UK. The slick chance of natural resources has been the basis of Saudi’s success as petroleum exports account for seventy five percent of the government’s income.

Why start a business here?

Almost everything about the Middle East evokes antiquity and authenticity. Saudi Arabia can brag of expansion rather than geographical destiny, as there have been intensive efforts to redefine the economy. With all its reforms and liberalizations there are plenty of entry options for foreign investors. The government is concentrating on efforts to improve the education and employment rate of its population with $40bn set aside for infrastructure projects. With one of the most rapidly expanding populations in the world there are excellent opportunities for companies setting up a business in Saudi Arabia. So if you are contemplating expanding business overseas, you may want to consider Saudi Arabia.

What is the Economic overview?

There is evident government control over the major economic operations, as Saudi Arabia is an oil based economy. More than 20 percent of the world’s petroleum reserves are in Saudi, and it plays a leading role in OPEC, being one of the largest petroleum exporters. The petroleum market constitutes approximately 75 percent of budget revenues, 45 percent of GDP, and 90 percent of export earnings. To decrease its dependence on oil exports and to boost employment opportunities for the mounting Saudi population the government is encouraging private sector growth - especially in power generation, telecommunications, natural gas exploration, and petrochemicals.

Business Investment opportunities

Saudi Arabia recently gained WTO membership, which makes it a more transparent and foreseeable arena for trade and foreign investment to take place. The Saudi government has also introduced measured reforms and is open to all outside investors. Foreign investors can now own up to 100% of ventures in some sectors.

The Main industrial Opportunities in Saudi Arabia
With 45 percent and 90 percent of export earnings all coming from the nations oil reserves, oil is easily Saudi Arabia’s biggest commodity. The others include power, vocational, technical and business education, Construction, Information and Communications technologies, oil, gas and petrochemicals and financial services.

Overcoming the Challenges
One of the biggest challenges faced by investors besides bureaucracy is contract enforcement. With no civil court system for resolving contract disputes or bankruptcies and no legislation for the protection of shareholders or investments, business operations could prove challenging in Saudi. When doing business overseas, especially in Saudi Arabia, it is important to acclimatize yourself with the law. Along with the help of a business expert, you can get the necessary guidance on all aspects of your business, be it legal, HR, Payroll, compliance or international accounting.

Know more -   international financial reporting, financial reporting international

How to Resolve Tax Issues in Transfer Pricing

The rapid increase in multinational trade and the use of transfer pricing tax strategies has attracted a high level of international attention. As multinational corporations are evolving into global enterprises, it is fast becoming a complicated and expensive task to comply with the differing landscape of legal precedents, regulations and local country nuances for transfer pricing issues. 
Tax authorities around the globe have increased efforts to get the extra tax dollars and become more aggressive in the transfer pricing arena. With the introduction of stricter penalties, increased information exchange, increased audit and inspection activity, it is critical to be informed and avoid costly penalties later. The intense scrutiny implies significant risks for the unwary and unprepared, especially in intercompany transfer pricing where every transaction needs to be analyzed under a different set of facts and circumstances. As transfer pricing varies across countries and it is difficult to keep abreast of all the information, for instance in 
Australia: The Australian Taxation Office (ATO) has stated that it will significantly increase spotlight on transfer pricing over the next four years starting with 2010 in the large taxpayer market (revenue greater than A$250 million).
Brazil: proposes to introduce thin capitalization rules dealing both with situations where the beneficiary of the payment is not resident in a tax haven jurisdiction and where the beneficiary is a resident in a tax haven.

Hong Kong: Recently issued it’s first-ever guidance on transfer pricing. The note provides the views of the Inland Revenue Department (IRD) on relief for double taxation under double taxation agreements, reporting of losses from related party transactions, among a few.

France: Has introduced a new transfer pricing documentation that states that the law does not provide for any de minimis exemption, transfer pricing documentation must be made available to the French tax administration at the start of a tax audit etc.

How to resolve tax issues in transfer pricing?
Transfer pricing does not exist in a vacuum so ignoring the best practices can affect your corporate strategy. Having a robust global transfer pricing strategy in place will help in addressing Tax issues in transfer pricing:

• If you do not have a transfer pricing agreement, address it urgently.
• Review your operations and consider whether you are within the size limits specified by the relevant country.
• Review your activities in the country and check whether these have expanded or changed in any way since you last reviewed your transfer pricing arrangements.
• Consider whether your structure and activities are likely to invite tax authority’s attention, making a tax audit more likely.
• If you have a transfer pricing agreement, it is still wise to check for changes in transfer pricing rules in the relevant countries such as those above that may warrant amendments to the agreement
• If you have an agreement but it has not been benchmarked, get one in place before you are advised of a tax audit.
• Remember benchmarking does take time, begin the process timely.
• Even if you are not subject to transfer pricing documentation regulations by your size, the rules constitute good practice, complying with them mitigates penalties in a transfer pricing audit.
• Keep in tune with changing transfer pricing regulation.

In an international business expansion, it is advantageous to have a trusted service provider can that can assist you in creating an appropriate tax and legal structure to optimize your new operating configuration. You can have unlimited assistance in aligning your tax profile and a good service provider would be focused on providing exceptional assistance in keeping you in tune with changing transfer pricing regulation.

Know more - doing business overseas , international financial reporting