Kingdom of Saudi Arabia
Government and institution measures in response to COVID-19.
Government and institution measures in response to COVID-19.
The Saudi Government has announced a set of support packages targeting the private sector, totaling almost $61 billion. The packages include exemptions and the postponement of some government dues ($18.6 billion), a $13.3 billion package to support the banking and SME sectors, a $13.3 billion allocation to ensure that government dues to the private sector are paid in a timely manner, and a wage subsidy of 60% (up to SAR 9,000 per employee per month) of Saudi employees’ salaries in the private sector. There are also numerous tax related-measures, including extending deadlines for filing tax returns and paying those taxes. SAMA has further announced injecting $13.3 billion into the banking sector to enhance banking liquidity and enable banks to continue providing credit facilities for the private sector.
Tax measures – Direct and Indirect
(e.g. payment deferrals, rate reductions…)
Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.
(e.g. state compensation schemes, training…)
- Saudi Government has announced to pay 60% of the salaries of Saudi employees working in the Private sector for a period of three months with a ceiling of USD 2.39 billion. The Compensation will be paid in accordance with the conditions stipulated in the unemployment insurance system (SANID)
- Allowing the employer and employee to agree within six months on either reducing the employee’s wage to adjust with the actual work hours (up to 40%), or granting the employee a local leave to be deducted from his/her deserved annual vacation, or granting him/her an exceptional leave. The termination is further not legitimate once it became evident that the employer has benefited from any government subsidy to deal with this situation.
- The Ministry also allows a temporary benefit from the services of off-labor-market expatriates through the "Ajeer" portal as an alternative to recruiting from abroad, as the Ministry aims through this decision to protect workers during such circumstances from being terminated or losing their contractual benefits. The portal will soon offer the businesses to publish names of their excess workers.
- Employers can facilitate the return of their expatriate employees to their homelands, by submitting an application to the Ministry of Human Resources and Social Development an application (one application is allowed every 14 days and can include multiple names)
- Human Resource Development Fund has allocated SAR 5.3bn to support private sector enterprises to hire and train nationals.
- Suspending fines related to expat recruitment.
- Lifting any suspension related to wages protection during the pandemic.
Economic stimulus measures
(e.g. loans, moratorium on debt repayments…)
- On 20 March, Saudi Arabia announced $18.6 billion in fiscal initiatives. These include an exemption from the expat levy, extending for 3 months without charge.
- SMEs that has 9 employees or less are exempted from paying expat levy for a period of 3 years for 2-4 expatriates.
- On 14 March, Saudi Arabia announced a stimulus package, including SAR 50 billion (USD 13.3 billion) for SMEs. Under Saudi Arabia's program, SAR 30 billion will be allocated for banks and financing companies to delay loan payments due from SMEs for six months. The package will provide SAR 13.2 billion to SMEs through bank loans to help them to continue operations and support growth. SMEs will also get relief from finance costs through a SAR 6 billion loan guarantee program. And as follows:
Deferred Payments Program
- Beneficiaries: All SMEs, according to the Institution Circular No. 381000064902, dated 16/06/1438 AH, and financing companies subject to the supervision of the Monetary Agency
- Postponement period: All outstanding installments (including accrued profits) from March 14, 2020 CE to September 14, 2020 CE. On September 1st 2020, this program was further extended for an additional 3 months ending December 14th 2020.
- Funding bodies: Banks and finance companies subject to the supervision of the Saudi Arabian Monetary Agency.
- The value of the program reaches 30 billion riyals, and the program aims to reduce the potential impact of the decrease in the cash flows that SMEs may face, by delaying the payment of the obligations of the beneficiaries for a period of nine months, and the amount allocated to the financing entities will be used to cover the cost of financing to those actors.
- The financing parties should communicate with the beneficiaries (by a certified means of communication) and notify them of the rescheduling of the financing and the postponement of the due installments according to the above-mentioned delay period, without any additional cost, while providing the option that the beneficiary does not wish to reschedule.
- Funding parties should communicate with the beneficiaries (by a certified means of communication) and notify them of rescheduling the financing and postponing the due installments according to the postponement period referred to above, without any additional cost, while providing the option that the beneficiary does not want to reschedule from rescheduling
- The program applies only to facilities classified in the first stage (according to the IFRS 9 standard) since the date of March 14, 2020 AD, and the facilities classified in the second and third stages are dealt with according to the usual procedures followed by the funding agencies.
- Funding parties must sign the necessary agreements with the monetary agency to implement the program.
Funding for Lending
- Providing concessional financing for SMEs in an amount up to (13.2 billion riyals), by granting facilities from banks and finance companies to the SME sector in order to support business continuity and growth in this sector during the current stage, and that contributes to supporting economic growth and maintaining The levels of employment in these establishments are as follows:
- Beneficiaries: All SMEs, according to Institution Circular No. 381000064902, dated 16/06/1438 AH, and finance companies subject to the supervision of the Monetary Agency.
- Funding bodies: Banks and finance companies subject to the supervision of the Monetary Agency.
- Duration of the program: One calendar year from the date of 14 March 2020, and extendable for an additional year, according to market conditions.
- Credit facilities will be provided at prices supported by the monetary agency for the account of the financing entities to enable them to grant subsidized loans to the beneficiaries.
- Amortization of the financing amount: The participating financing bodies must complete the financing of the beneficiaries within a maximum period of two weeks from the date of withdrawal from the credit facilities provided through the program to benefit from these facilities. If the funding bodies are unable to consume the amount during this period, it will be returned to the Monetary Agency.
- Payment term of financing: The financing is to be paid by the financing agency within a period of (36) months from the date of granting the financing to the beneficiaries.
- The financing parties are committed to grant financing to the beneficiaries according to the credit policy of the financing agencies at a competitive price.
- The financing authorities are obligated to open a separate bank account to implement the program.
- Periodic reports: Monthly reports are provided to the Monetary Agency regarding the performance of the program, including the funded and recovered amounts and what the organization deems appropriate.
- The participating financing bodies must take into consideration the cost of the support granted by the Monetary Agency during this program in pricing the credit facilities granted to the beneficiaries.
- The financing authorities must sign the necessary agreements with the monetary institution to implement the program.
Loan Guarantee Program
- Depositing an amount of (6) billion riyals for the benefit of the financing entities to enable them to exempt the micro, small and medium enterprises from the costs of the program of guaranteeing the financing of the micro, small and medium enterprises (guarantee) with the aim of contributing to reducing the cost of lending to the enterprises that benefit from these guarantees during the fiscal year 2020 AD and support Expanding financing. And as follows:
- Beneficiaries: All SMEs, according to the Institution Circular No. 381000064902, dated 16/06/1438 AH, and financing companies subject to the supervision of the Monetary Agency.
- Exemption period from March 14, 2020 CE to December 31, 2020 CE.
- Quality of exemption: Exempting the beneficiaries from fees (issuance, renewal, extension, and rescheduling) of the guarantees issued by the sponsorship program.
- Funding parties: banks and financing companies subject to the supervision of the Monetary Agency. The requests of the beneficiaries are submitted to the Kafala program according to the current procedures.
- The financing entity must provide an official exemption notice to the facility benefiting from the guarantee program, including exempting the facility from fees due to the sponsorship program.
- The financing authority should provide the Foundation with a statement stating the total fees paid for the sponsorship program on a monthly basis, provided that the statement includes the names of the establishments benefiting from the Foundation’s support program, the amount of the fee paid for the sponsorship program and a copy of the exemption notice submitted to the facility, starting at the end of March 2020.
- In addition SAMA has been in continuous dialogue with local commercial banks to support certain sectors that are highly impacted by the current circumstances and therefore asking Banks for qualitative measures, including:
- Extending working capital finance to all corporates in such sectors and addressing their short term liquidity requirements
- Instigating Private Sector Job Retention Schemes – PSJRC for corporate customers in order to maintain the employment at these customers and providing concessional bridging loans for at least six months;
- Introducing flexibility in repayments of Consumer Finance to individuals who have lost their job due to Covid-19. This includes the relief of repayment of the loan or mortgage payment for a period up to six months at no additional cost;
- Waiver of all fees and other charges resulting from the use of digital banking for a period of up to six months;
- Waiver of the minimum deposit balance requirement for the period of up to six months; and
- Reviewing credit card interest rates and adjusting them to reasonable APR rate
- The impact of such qualitative measures will be significant and its modalities are currently being discussed between Banks and SAMA.
- On June 1st 2020, SAMA has announced that they will be injecting SAR 50 billion into the banking sector to enhance banking liquidity and enable banks to continue providing credit facilities for the private sector. Through this support measure, SAMA aims to help banks revise or restructure the private sector loans with no additional charges, support plans to maintain employment levels in the private sector, and provide certain e-banking services for free
- On September 1st 2020, SAMA further extended the validity these measures for another three-month ending in December 2020.
Measures to ease the lockdown
- KSA is currently in its Third and last phase before fully returning to normal conditions:
- No curfew across the country with strict restrictions for certain activities such as large gatherings of individuals
- All commercial activities are back to normal and public and private sector companies allowed to resume work from office under strict health guidelines
- Wearing of masks is compulsory in public with fines for those who do not comply
- Domestic flights are open while International flights are limited for those who have valid residency who want to return or those with valid travel needs abroad such as diplomats, students and business activities. Full international flights expected on January 1, 2021
- Schools across the Kingdom have reopened with online teaching for the 1st 7 weeks to be reassessed afterwards for physical start
- Performing Umrah for residents in KSA is now allowed with strict control of number through the use of applications
- As a part of the efforts to mitigate the impact of the COVID -19 pandemic on the economic activities of the Kingdom, the Government of Saudi Arabia has announced several measures targeted specifically at taxpayers that are designed to ease filing and payment requirements for a limited period.
Other measures and sources
- Postponing the payment of commercial registration fees to more than 116,000 commercial records
- 25% reduction of expat levy for operational factories until end of year.
- Postponing and restructuring the payment of loans installments for large and small factories small projects and medical projects due in 2020.
- Social Development Bank has issued a SAR 13bn initiative to support citizens, families and small establishments to cope with COVID-19 economical impact.
- Approved a 30% discount for two months on utility bills for the commercial, industrial and agricultural sector.
- Lifting the temporary suspension of private sector companies to correct activity status
Main sources of information
Tax: Wadih Abu Nasr – firstname.lastname@example.org
Restructuring: Firass Hathout – email@example.com
Government: Ismail Alani – firstname.lastname@example.org