New Nitaqat Program
The Ministry of Labor (MOL) has approved the new "Balanced" Nitaqat Program, which will begin on 11 December 2016.
Under the new system, the MOL uses a points system whereby companies register points based on five factors:
- Saudization percentage;
- average salary of Saudi employees;
- percentage of female Saudi employees;
- job sustainability for Saudi employees; and
- percentage of high-salaried Saudi employees.
Despite the new system, the existing Nitaqat procedure for categorizing companies based on their size and the industry in which they operate, ranking them on a color-coded scale, and applying penalties or benefits on the basis of which color they fall into, will remain in place.
We will keep you updated as we continue to learn more about the revised and updated system. It will be interesting to see how the MOL will define the above categories.
Saudi Gazette – 7 November 2016
Special Labor Courts Launching Soon
The Ministry of Justice (MOJ) and the Supreme Judicial Council have finally stepped forward with launching the special labor courts in Saudi Arabia, which are expected to begin functioning during the current Hijri year of 1438 (which began on 2 October 2016). Currently, labor and employment law disputes are subject to the jurisdiction of the Labor Office (for mandatory and non-binding pre-litigation mediation) and the Commission for the Settlement of Labor Disputes (the Commission) (for binding and final resolution) – which are both under the MOL.
As of yet, the role of the MOL generally, and the Labor Office and Commission specifically, in the resolution of labor and employment disputes in light of the new special labor courts under the MOJ is unclear. Because part of the MOL's mandate is to safeguard Saudization and protect workers, it will be interesting to see if the labor courts under the MOJ will act differently than the Labor Office and Commission and perhaps more independently of such goals.
Arab News – 24 October 2016
Health Insurance Premium Required for Visitors
Implementations of health insurance on expatriate visitors have been started by the Council of Cooperative Health Insurance (CCHI) as per the Cabinet's decision two years ago. Eight companies have been licensed by the CCHI to provide insurance cover to expatriate visitors in Saudi Arabia. The insurance companies will decide the premium based on the visitor's age and gender. Furthermore, expatriates who come to Saudi Arabia on visit or transit visas will now have to pay health insurance premium for themselves and those accompanying them. However, there are certain categories which are exempt from compulsory health insurance, such as Haj and Umrah pilgrims, diplomats and visitors to foreign missions, international organizations for the purpose of diplomatic work, and guests of Saudi Arabia.
Saudi Gazette – 25 October 2016
New General Entertainment Authority
The Council of Ministers has approved the Organizational Arrangements for the General Entertainment Authority (the GEA). As part of Vision 2030 and increasing societal liberalization in Saudi Arabia, government authorities and the private sector have sought to open up and develop the entertainment sector. The arrangements to establish the GEA came into effect on 28 October 2016. It will be interesting to see what role the GEA plays in fields such as foreign investment.
Um Al-Qura – 28 October 2016
Gulf Finance Ministers to Approve VAT
After regional talks with the International Monetary Fund (IMF), Gulf Finance Ministers were set to approve a value added tax (VAT) in response to plunging revenues from petroleum sales. Oil prices are now hovering around USD 50 per barrel after a 10-year low of less than USD 30 in January and a peak of USD 100 in 2014. GCC countries have also decreased government spending and raised energy prices in response to the dip in oil prices.
In June, all six members of the GCC agreed on a 5% VAT on certain goods, which is set to take effect in 2018. This move comes after the approval of an excise tax by the Saudi Ministry of Finance, also after recommendations by the IMF.
Arab News – 28 October 2016
CAPITAL MARKET DEVELOPMENTS
Foreign Investment in REITs
The Real Estate Investment Traded Funds Instructions were issued by the Capital Market Authority (CMA) on 24 October 2016 and came into effect on 30 October.
The Instructions set out the basis and rules for establishing publicly traded REITs in Saudi Arabia and are important for, among other things, developing Saudi Arabia's housing market. As part of the CMA's gradual liberalization of Saudi Arabia's capital markets, non-resident foreign investors will be permitted to invest in Saudi REITs.
Arab News – 31 October 2016
Application of Companies Law to Listed Companies
Saudi Arabia's new Companies Law came into effect on 2 May 2016. However, in addition to the Companies Law, listed companies in Saudi Arabia are also subject to the Capital Markets Law and its several Implementing Regulations. In some cases, the adoption of the new Companies Law brought some uncertainty to the regulation of listed companies.
Thus, the CMA on 17 October issued the Regulatory Rules and Procedures pursuant to the Companies Law relating to Listed Joint Stock Companies, which seek to clarify these issues.
Arab News – 1 November 2016
New Accounting Standards
As part of the CMAs' efforts to bring the Saudi stock market into the global investing mainstream, it has presented new accounting standards and asked the country's 175 listed companies to adopt the International Financial Reporting Standards (IFRS) from the start of 2017. Most Saudi companies have previously used local accounting standards, known as SOCPA. Adopting the IFRS is new and might be a complex task.
Currently, only banks and insurers are required to follow the IFRS, though some smaller companies have come into partial compliance. The CMA has not yet stated what the penalty will be for late or non-compliance.
Arab News – 17 October 2016
New Important Rules Published
The Saudi Official Gazette, Um Al-Qura, has published two procedural rules, which are:
- the Procedural Rules for the Banking Disputes Committee and the Appeal Committee for Banking Violations and Disputes; and
- the Procedural Rules for the
Committee for Resolution of Financing Violations and Disputes and
the Appeal Committee for Resolution of Financial Violations and
Both rules will come into force 30 days from the date of publication thereof i.e. 28 November 2016.
Um Al-Qura – 28 October 2016
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