Saudi Arabia: Saudi Arabia Update - May 2017

Legal Developments

Potential hourly wage system

The Ministry of Labor and Social Development (MOL) is discussing a potential new employment system for Saudi employees named "Flexible Work" (Flexible Work). Flexible Work will be a system whereby an employee may be paid an hourly wage on a weekly basis in arrears, and various entitlements currently required under the Labor Law for conventional employees would not be required, such as:

  1. paid leave periods (e.g., annual leave and public holidays);
  2. employer-provided medical insurance; and
  3. end-of-service award due upon termination of employment.

Employers, however, will still be required to ensure job security and vocational health for workers employed under the program.

The MOL describes Flexible Work as a benefit to both employers and Saudi employees who do not want to sign extended employment contracts and would allow 3.5 per cent of current job openings to be performed remotely. Under the Saudization regime (Nitaqat), part-time employees would be counted as one-half of a Saudi employee, while employees with special needs would be counted as a single Saudi employee, regardless of whether they work part time or full time.

Saudi Gazette – 17 May 2017

Draft Selective Tax Law

Further to the Unified Agreement on Selective Tax adopted by The Gulf Cooperation Council (GCC) on 16 October 2016, the Shoura Council approved the draft implementation of the agreement for Saudi Arabia. The draft consists of 30 articles aiming to impose a selective tax with the objective of reducing the consumption of goods that are harmful to health and encouraging society to increase the consumption of healthy products. It further gives flexibility in introducing selective tax and determining the procedural rules related to taxation in free zones and duty-free shops. The draft proposes a 100% tax on tobacco and tobacco products and a 50% tax on energy drinks and carbonated beverages.

Saudi Gazette – 13 April 2017

Saudization of car rental offices

The MOL unveiled potential plans for 100% Saudization of the car rental sector and the challenges facing this move. A unified employment contract will be drafted for Saudis who are interested in joining the car rental sector.

Saudi Gazette – 16 April 2017

30-day grace period on expired insurance policies

The Executive Insurance Committee confirmed the commitment of insurance companies to offer a 30-day grace period on expired insurance policies. This step was taken in order to grant no-claim and loyalty discounts approved by the Saudi Arabian Monetary Agency (SAMA). SAMA has requested insurance companies provide no-claim discounts of up to 30 per cent on their policy prices last month. Offering the 30-day grace period will replace the previous condition to have an active policy without a break in the insurance duration, which prevented many customers from benefiting from the discounts.

Saudi Gazette – 16 April 2017

Minister of Finance urges the need for a Bankruptcy Law

Pursuant to the goals of Vision 2030 to improve business regulations and the legal framework in Saudi Arabia to attract foreign investment, a draft bankruptcy law was issued in September 2016.

Further, Minister of Finance Mohammed Al-Jadaan recently stressed the need for a bankruptcy law in order to speed up bankruptcy and liquidation proceedings for companies affected by the Kingdom's new austerity measures accompanying Vision 2030. Such a law would afford firms facing bankruptcy greater legal protection, the Minister argued, as well as help attract foreign investors by aiding Saudi companies in overcoming their financial problems through restructuring.

Saudi Gazette – 23 April 2017

Capital Markets Developments

Amendment to the Implementing Regulations of the Income Tax Law

The General Authority of Zakat and Income Tax (GAZT) has amended Article 1.1 of the Implementing Regulations of the Income Tax Law to clarify that publicly traded shares held by non-Saudi shareholders are not considered taxable shares because their value is not fixed and is subject to change.

Um Al-Qura Newspaper – 14 April 2017

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