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The consumer

Consumer Profile
The Saudi population represents 0.45% of the world's population with 34.9 million inhabitants in 2020. Some 42.2% are women according to the latest estimates of the World Bank. The population increases by 1.6% per year, bringing the country's density from 9.6 inhabitants / km2 in 2000 to 16 inhabitants / km2 in 2020. According to the World Bank 32.3% of the population residing in Saudi Arabia was born outside the country. The median age is 31.8 years in 2020 while it was 21.3 years in 2000. This ageing of the population can be seen at all age group levels. The  0/14 age group represented 24.86% of the population in 2019 compared to 41.7% in 1995, the 15/64 age group 71.7% in 2019 against 55.3% in 1995 and those aged 65 and over 3.4% against 2.9% over the same period. While this ageing the Saudi government even estimates that the over 60s could represent 25% of the population by 2050.
The number of households is 5.46 millions of which 35.9% are foreign and 64.1% Saudi. According to the country's General Statistics Authority, households have an average of 5.9 people and 52% of them are in Mecca or Riyadh. The majority of the population is urban with 84% of Saudis living in the city in 2020 and 46.17% of whom live in settlements with more than one million residents. There are four of these,  Riyadh (capital and the most populous city in the country with more than 4 million souls), Jeddah, Mecca and Medina. According to the World Bank, 95.3% of the population aged 15 and over was literate in 2017 (latest data avilable, UNESCO). Thus, 92.7% of women and 97.1% of Saudi men know how to read and write. The enrolment rate has increased significantly in the last ten years. According to UNESCO, 100.7% of the population attended primary education in 2019, compared to 95.7% in 2005, according to the World Bank. Some 111.8% of the population had secondary education in 2019 compared to 87.4% in 2005 and 71% of the population attended tertiary education in 2019 whereas only 29.5% had this chance in 2005. While unemployment affects 5.8% of the total population in 2020, it concerns 28.8% of young people aged 15 to 24, and 22.5% of women looking for work (only 2.7% of men). The hiring sectors are services (73% of total employment), industry (25%) and agriculture (2.3%).
Purchasing Power
In Saudi Arabia, GDP per capita PPP was $ 48,908 in 2019 compared with $ 39,882 in 2000, according to the World Bank. A five-year survey data issued by the General Authority for Statistics (GASTAT) showed that the average monthly income for Saudi families amounted to SAR 14,820 in 2018, up 8.9% from 2013’s income of SAR 11,980. The average monthly income for individuals (Saudis and residents) reached SAR 2,485 in 2018, compared to SAR 2,062 in 2013. One of the main problem of Saudi Arabia is the low household savings ratio, which stood at 1.6 percent of annual disposable income for Saudi nationals in 2018, which is significantly below the 10 percent global standard recognized as the minimum level to ensure long-term financial independence.
The kingdom has a two-tier economy made up of about 16 million Saudis, with most of the rest foreign workers. They have lower income and work mainly in the construction and maintenance sector. The poverty rate among Saudis continues to rise as youth unemployment skyrockets.
Another notable inequality is women's access to education, work and outdoor activities. While Prince Mohammed bin Salman has taken a more progressive approach in granting driving licenses the kingdom remains one of the world's most lagging countries in terms of gender equality. In particular, gender segregation and women's wards prevent women from working, making Saudi Arabia one of the lowest countries in the world for women to access jobs. According to the World Bank, the proportion of women that is economically active is 23.5% in 2020, far below the 81% male labor force participation rate.
Consumer Behaviour
According to the latest survey of McKinsey & Company, Saudi consumer optimism has remained steady throughout the Covid-19 crisis, even if more than half of consumers have seen a decline in income savings. Most Saudi shoppers go to shopping centres for food, clothing and electronics. According to a survey conducted by McKinsey & Company in 2018, they can be divided into five broad categories based on their behaviours. The savvy consumers, brand savers, multi-channel buyers, discounted converts and selective spenders. More generally, Saudis prefer quality over quantity (66% of consumers value quality over price) and are attracted by international brands, especially luxury brands. However, in recent years there has been a change in the behaviour of consumers in the Arab world in general, and Saudi Arabia in particular. They pay more attention to prices and are therefore less loyal to brands. Some 52% of Saudi Arabian consumers are becoming more mindful of how they spend their money. Consumers tend to change to less expensive products, research brand and make shopping lists before buying. In the last months, they show increased shopping intent for essential categories and expect to shop more online. This trend is accompanied by a decrease in consumer confidence, decreasing to 104 index points in July 2020, compared with 121 index points in January 2020 according to Trading Economics.

The e-commerce market in the MENA region is particularly promising and represents the emerging trend in Saudi Arabia. Its growth is even one of the largest in the world according to an Ipsos survey conducted in 2018. The total value of the e-commerce market for consumer goods in the country was estimated at $ 6.31 billion in 2020, a 28% increase over the previous year. For example, 64% of Saudis now report buying a product or service online every month. A behaviour strongly focused on their mobile phones with 51% of internet users making their purchases smartphones and barely 24% on a computer. This is mainly due to the predominance of a young and connected population (86.8% of households have access to the internet) that seeks to save time and money, but also by the arrival in Saudi Arabia of new secure online payment methods. E-consumers are mainly men, aged from 25 to 44 years. The market's largest segment is Fashion with a projected market volume of US$2,058m in 2020, then there are electronics & media and food &personal care. According to the survey of McKinsey & Company, more people expect to make a portion of their purchases online post-Covid-19 than before. It is common for these internet users to discover new brands and new places to shop thanks to online activity and online ads. The researchers highlighted the positive impact of social media on the development of companies located in the country, particularly in terms of communication with customers and business partners.
Consumer Recourse to Credit

As of 2010, the use of credit continues to grow in Saudi Arabia with consumer loans increasing by 17.3% every year between 2010 and 2014 at the height of the trend. This has been accompanied by an increase in the use of credit cards, whose circulation has increased by 28% in 2013 alone. To curb this progression before it becomes problematic, the Saudi monetary agency set up, as of 2015, restrictions on cash withdrawals citizens can make with credit cards. These are now limited to a maximum of 30% of the consumer's monthly expenses (compared to 50% previously).
In June 2018, Saudi household debt reached $ 88.6 billion, compared to $ 87.7 billion in the previous quarter. It affected 12.83% of households in 2017, according to the IMF.
Growing Sectors
With the Vision2030 plan, the kingdom hopes to diversify its economy. Tourism and leisure, manufacturing or new technologies are all sectors that should benefit from this new development. The digital economy is also a sector on which the Saudi government is banking on. In order to encourage the use of electronic payments, the Saudi Monetary Agency has taken a number of initiatives, including the introduction of a new electronic payment system "mada" and mandatory payment of salaries into bank accounts.
In addition, the creation of a new city dedicated to energy and the construction of a gas distribution network represent important opportunities. With more than $ 1.4 trillion in planned and ongoing major investments, Saudi Arabia is the largest construction project market in the region.
Consumers Associations
Consumer Protection Association of Saudi Arabia
 

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Importing & Distributing

Import Procedures
The following is the list of documents required for customs clearance in Saudi Arabia. The list subject to modification. Please visit the website of the Saudi Ministry of Commerce for future updates.

  • Commercial Invoice, indicating the country of origin, name of the carrier, brand and quantity of goods, and description of the goods including weight and value.
  • Certificate of origin, authenticated by a local chamber of commerce and translated into Arabic.
  • A bill of lading (or airway bill)
  • A steamship (or airline) company certificate, which is an Appended Declaration to Bill of Lading or airway bill) should be issued by the steamship (or airlines) company in at least one original
  • An insurance certificate (if goods are insured by the exporter)
  • Packing List

Saudi Arabian Standard Organizations (SASO) is the regulatory authority controls quality of goods imported into Saudi Arabia. The conformity certificate is required to ensure all imported goods conform with Saudi standards

For more information, please visit the website of Saudi Customs.

Specific Import Procedures
Depending on the nature of exported goods to Saudi Arabia, or according to a request from the Saudi importer, certain documents may also be required.
Requirements for labeling food and food products sold in the Kingdom of Saudi Arabia are determined by the SASO. Exporters of these products should must provide the following certificates: Food Manufacturer’s Ingredients Certificate, Consumer Protection Certificate and Price List.
In addition to the general shipping documents all meat shipments must be accompanied by the following certificates: a certificate of "Halal" meat and an Official Health Certificate.
The Health Certificate is required for all exports to Saudi Arabia of all kinds of meats, (including poultry and seafood), meat products, livestock, vegetables, fruits, and human blood, attesting to the fact that they are free from pests and/or disease.
Furthermore, the exporter of seeds or grains must provide the following authenticated certificates: Certificate of Inspection, Phytosanitary Certificate, Seed Analysis Certificate, Certificate of Weight.
Other special shipping documents are required for shipment of livestock, pets, horses, importation of fruit and vegetables, electrical appliances and equipment, motor vehicles and medicines and pharmaceuticals.
Distribution channels
Saudi Arabia is the largest consumer market in the GGC countries. Despite the fall in oil prices, the market in Saudi Arabia has been continuing to enjoy a robust growth, due to its solid base of domestic consumers and growing youth population with high disposable income, the rising level of disposable income (higher than the global average), and high consumer confidence index. BMI research indicates that total household spending in the retail sector was estimated at $293 billion in 2019.  Population expansion and considerable purchasing power combine to have a positive impact on the Saudi retail sector, which is expected to reach $350 billion in 2022.
The government has moved on in order not to rely solely on revenues from fuel as the global energy market dynamics is changing and demographics of the country is expected to enter the transition phase with an increasing number of working-age Saudi Arabians by 2030. One of the main characteristics of the retail market is the high demand for luxury products.
According to the most recent available figures from the General Authority for Statistics (GASTAT), Saudi nationals make up 48.4% of the retail workforce, with just under half of these employees, some 125,000, being women. This strong representation in the retail workforce helped take the overall Saudi female economic participation rate to 19.7% as of the end of September 2019.
There are three main commercially active regions in the Kingdom: the Western Region, with the city of Jeddah as the main commercial centre; the Central Region, including the capital Riyadh; and the Eastern Province, where the oil and gas industry is concentrated.
In terms of product category, food & beverages accounted for a nearly one-third market share in 2018 and the segment is anticipated to maintain its market dominance in the short-term.
Some of the major players operating in Saudi Arabia retail market are Panda Retail Co (Savola Group), Lulu Group International (EMKE Group), Abdullah Al Othaim Markets Co., Fawaz Abdulaziz AlHokair Co., Majid Al Futtaim Retail LLC, among others.
Distribution market players
The Saudi food retail sector is increasingly competitive, marked by the presence of domestic, regional and international outlets. The structure of retailing is characterized by the presence of supermarkets, hypermarkets and other convenience-oriented sales channels. The number of supermarkets and hypermarkets in Saudi Arabia increased by more than double between 2011 and 2016. In the fragmented domestic retail market, there is high pressure to innovate. Due to the recent decision taken by the Ministry of Labor and Social Development to reduce the share of the Saudi labor force consisting of low-skilled expatriate workers,  relative margins have decreased, therefore driving up wage bills. This has disproportionately affected independent and convenience retailers (bakalas) and creates strong pressure to realize cost savings in other areas of operation without compromising consumer experience.
According to the US Foreign Agricultural Service latest survey, in 2016, the total number of supermarkets and hypermarkets in Saudi Arabia was estimated at 1,255 stores. This is a relatively small number, and accounts for only 2.9% of the retail outlets. However, this 2.9% of outlets accounted for approximately 37% of total grocery sales in Saudi Arabia. They are mostly located in the three major cites of the Kingdom (Riyadh, Jeddah and Dammam).
According to “The Food and Beverage Market Entry Handbook: Saudi Arabia”, the main supermarkets and hypermarkets are: Panda Supermarkets, Al-Othaim Supermarket, Farm Supermarkets, Al Raya Supermarkets, Tamimi Markets, Bin Dawood Supermarkets, Carrefour Saudi Arabia, Danube Supermarkets, Balsharaf Supermarkets, Al Sadhan Supermarkets, Lulu and Nesto Supermarktes.
Traditional retailers and independent grocers collectively account for the large majority of sales in Saudi Arabia. Bakalas are well-suited to cater to day-to-day consumer needs, particularly in terms of small quantity purchases. Prices in bakalas tend to be high, but they maintain an advantage over supermarkets by providing different services to shoppers looking to buy quickly a few items.

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Operating a Business

Type of companies

Sole Proprietorship
Number of partners: One single person.
Capital (max/min): No minimum capital required.
Shareholders and liability: The individual entrepreneur is liable for the company's debts with his personal possessions.
Limited Liability Company
Number of partners: Minimum one director and one shareholder
Capital (max/min): Minimum SAR 100,000.
Shareholders and liability: Liability is limited to the amount contributed.
Joint Stock Company
Number of partners: Minimum three directors and one shareholder
Capital (max/min): Minimum SAR 500,000.
Shareholders and liability: Liability is limited to the amount contributed.
Limited Partnership
Number of partners: Minimum one director and two partners
Capital (max/min): No minimum capital
Shareholders and liability: At least one partner must have an unlimited liability. Liability of other partners is limited to the amount contributed.
 
Setting Up a Company Saudi Arabia Middle East & North Africa
Procedures (number) 3.0 6.3
Time (days) 10.4 19.5

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
SAR 3 000 - only Saudi workers in the public sector can claim the minimum wage (ILO, 2013, lastest available data).
Since 2014, Saudi Minister of Labor repeatedly mentionned the possiblity to instaure a minimum wage for the private sector and expatriates.
Average Wage
According to the labor market bulletin of the second quarter of 2018, latest survey of the General Authority for Statistics (GASTAT), the average monthly wage of Saudi workers who get paid for their work in four sectors; public sector, private sector, non-profit organizations, international and regional agencies, and other sectors reached 10.238 SAR.
Social Contributions
Social Security Contributions Paid By Employers: Employers contribute 9% of monthly covered payroll (monthly earnings considered are min SAR 1,500 and max SAR 45,000) to GOSI and 2% salary of all employees for work injury. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Social Security Contributions Paid By Employees: Saudi employees contribute 9% of gross monthly covered earnings, within the maximum limit of SAR 45,000. From 1 Sep 2014, an additional 1% unemployment insurance contribution is required.
Self-employed Saudi residents contribute 18% of monthly covered declared earnings (monthly earnings considered are min SAR 1,200 and max SAR 45,000). Unemployment insurance contribution is not applicable to self-employed individuals.
 

Intellectual Property

National Organisations
Industrial Property Office (Patents): Directorate of Patents at King Abdul-Aziz City of Science and Technology is deemed as the "Patent Office" of the Kingdom.

Industrial Property Office (Marks): Ministry of Commerce and Industry - Trade Mark Section

Copyright Office: Ministry of Information - General Administration of Copyright.

Regional Organisations
Arab Society for Intellectual Property (ASIP)

Arab Intellectual Property Mediation and Arbitration Society (AIPMAS)

International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

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Tax Rates

Consumption Taxes

Nature of the Tax
A Value Added Tax (VAT) was introduced on 1st January 2018. For more info consult the website of the General Authority for Zakat and Tax.
Tax Rate
15% (effective 1 July 2020).
Reduced Tax Rate
Certain goods and services are zero-rated, including exports of goods and services outside the GCC, the supply of qualifying medicines, medical goods, investment precious metals, and international transport services.
Other Consumption Taxes
Other consumption taxes are levied at the national level and the local level (e.g. gasoline tax, aviation fuel tax, liquefied petroleum gas tax, petroleum tax, motor vehicle tax, etc.). Excise tax was introduced as from 2017. The rate is 50% on soft drinks and 100% on energy drinks, tobacco products, and electronic devices used for smoking or vaping. In order to comply with the Saudi Arabian Excise Tax Law, manufacturers and importers of such goods are required to register with the General Authority of Zakat and Tax.
 

Corporate Taxes

Company Tax
20% + 2.5% Zakat
Tax Rate For Foreign Companies
A resident corporation is taxed on income arising in Saudi Arabia. A company is considered resident if it is registered in accordance with the regulations for companies in Saudi Arabia or if its central management is in the Kingdom.
A non-resident carrying out activities in Saudi Arabia through a permanent establishment is taxed on income arising from or related to the permanent establishment.
Capital Gains Taxation
The disposal of shares in a resident company by a non-resident shareholder is subject to a capital gains tax of 20%. Capital gains are subject to the normal income tax or Zakat rate, as appropriate. However, capital gains deriving from the disposal of securities traded on foreign stock markets are tax-exempt if they are also traded on the Saudi stock market.

Capital gains and losses on depreciable assets are not taken into consideration in determining the tax base. No gain or loss arises on the transfer of assets between companies belonging to the same group provided that the companies are wholly owned directly or indirectly within the group and the assets are not disposed of outside the group for two years from the date of transfer.

Main Allowable Deductions and Tax Credits
All costs and expenses paid or incurred during the tax year to earn taxable income such as salaries and wages, travel expenses which are connected with the business or enterprise, and rent on properties used in the business, are deductible from the tax base, provided that they respect certain conditions: the expenses are supported by a verifiable document or other qualifying evidence; they are related to the generation of taxable income and to the subject tax year; they are of a non-capital nature.

Other expenses which may be deducted from the tax base include: employers’ contributions paid for the employees to retirement funds; research and development expenses incurred to generate an income that is subject to taxation; costs of repair, maintenance and improvement of depreciable fixed assets, school fees paid for the employees’ children (provided that such benefit is stated in the employment contract and that fees are paid to a local licensed school). Start-up expenses can generally be fully expensed in the first financial year or can be capitalised and amortised. Bad debts are also deductible (conditions apply), same as for donations to certain approved charitable organizations. Operational losses can be carried forward (the maximum yearly profit percentage that could be used to offset cumulative losses should not exceed 25% of the year’s taxable profit). Carryback of losses is not permitted.

Non-deductible expenses include: taxes, entertainment expenses incurred for certain events, expenses of an individual for personal consumption, insurance commission in excess of 3% of total premiums collected in Saudi Arabia through an agent or other, payments made to headquarter offices located abroad by wholly owned local subsidiaries or branches.

Tax incentives are provided for investments at 50% of annual training costs for Saudi labour and 50% of their annual wages paid to Saudi citizens. The Saudi government also grants a 10-year tax incentive on investments in the following six underdeveloped provinces: Hail, Jizan, Abha, Northern Border, Najran and Al-jouf. Machinery and raw materials that are required for approved projects are exempted from customs duties (when they are not available in the local market).

Other Corporate Taxes
There is no capital duty, stamp duty or payroll tax in Saudi Arabia. While there is no real estate tax, Zakat (religious tax) may be payable on real estate if held for speculation.
A Real Estate Transaction Tax ("RETT") applies on the disposal of real estate, at a rate of 5%.

Zakat also applies to companies that are resident in Saudi Arabia and other GCC nations. It is levied at a flat rate of 2.5% and is chargeable on the total of the taxpayer's capital resources held more than 12 months and income not invested in fixed assets. These include the company’s capital, net profits, retained earnings and reserves not created for specific liabilities.

Saudi employees are responsible for the monthly payment of the social insurance tax, that is levied at 2% for non-Saudi employees and 12% for Saudi employees (who also have to contribute with 10%), calculated on basic wage, housing allowance and commissions (capped at SAR 45,000).

Other Domestic Resources
General Authority of Zakat and Tax
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the international tax treaties on the website of the General Authority of Zakat and Tax
Withholding Taxes
When paid to a non-resident, withholding tax rates are 5% for dividends, 5% for interest and 15% for royalties, unless otherwise provided in a tax treaty.

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