AI Summary
Tadawul trading screen
Saudi Arabia’s capital market opens today, Feb. 1, to all categories of foreign investors, enabling them to invest directly.
Earlier, the Capital Market Authority (CMA) board approved a regulatory framework allowing non-resident foreign investors to invest directly in Tadawul’s Main Market (TASI).
The approved amendments aim to broaden and diversify the investor base permitted to invest in TASI, supporting investment inflows and enhancing liquidity levels.
They do away with the concept of a qualified foreign investor (QFI) in the Main Market, allowing all categories of foreign investors to enter the market without the need to meet qualification requirements.
The amendments also abolished the regulatory framework for swap agreements, which had been used as an option to enable non-resident foreign investors to obtain only the economic benefits of listed securities, and instead allow direct investment in shares listed on TASI.
The CMA noted that the amendments are in line with its gradual approach to open the market following several previous phases, to be followed by further complementary phases aimed at enhancing market openness and positioning the capital market as an international market that attracts greater foreign capital inflows.
International investor ownership in the Saudi capital market exceeded SAR 590 billion by the end of Q3 2025, and international investments in Tadawul’s TASI reached around SAR 519 billion during the same period, up from SAR 498 billion at the end of 2024.
The amendments are forecast to attract additional international investments.
Under the new regulations, foreign investors are classified as follows:
Resident foreigner: An individual residing in Saudi Arabia who holds a valid residence permit or resident ID.
Foreign resident in GCC countries: A foreign individual who resides in one of the Gulf Cooperation Council (GCC) member states.
Non-resident foreigner: An individual who does not reside in Saudi Arabia or any GCC member state.
Foreign legal entity: An entity established outside the Kingdom that is permitted to open an investment account to invest in securities, in accordance with the regulations and instructions issued by the CMA.
Foreign strategic investor: A special category of foreign investors that holds strategic stakes in listed companies and is subject to its own specific regulatory framework.
Foreign fund: An investment fund established outside the Kingdom.
Below are the key questions regarding foreign investors’ entry and their ability to invest directly in the market:
Frequently Asked Questions
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What restrictions apply to foreign investors’ investments? |
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A non-resident foreign investor (excluding a foreign strategic investor) may not own 10% or more of the shares of any listed issuer.
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Is a market institution required, when opening an investment account for a foreign investor or relying on a third party to do so, to obtain copies of the IDs of its owners, directors, authorized signatories, and account managers? |
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A market institution, when opening an investment account for a foreign investor, is not required to obtain copies of the IDs of its owners, directors, authorized signatories, or persons authorized to manage the account. However, the market institution is obliged to identify and verify their identities using documents, data, or information from a reliable and independent source in accordance with relevant laws, regulations, and instructions.
This also applies if a market institution relies on a third party to open an investment account for a foreign investor, provided the market institution takes adequate measures to ensure that identification data and other due diligence-related documents will be made available upon request and without delay by the third party, in accordance with applicable laws, regulations, and instructions.
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How can a foreign strategic investor acquire strategic stakes in companies? |
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By purchasing directly through the market, via a private transaction, by submitting a takeover offer for shares, or participating in IPOs
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Are foreign investors entitled to vote at general assemblies? Can they vote electronically? |
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Yes, foreign investors are entitled to vote in accordance with the approved regulations.
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Is a non-resident foreign investor subject to income tax? |
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Yes, a 5% withholding tax applies on total dividends. Capital gains are not subject to tax.
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Who is responsible for complying with ownership limits when appointing a foreign portfolio manager? |
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The non-resident foreign investor.
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Who is responsible for withholding tax on dividends distributed to a non-resident investor? |
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The listed company that distributed the dividends.
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May a foreign investor run for membership on company boards of directors? |
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Yes, in accordance with the Companies Law.
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Can a foreign investor subscribe to IPOs? |
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Yes, subject to the relevant provisions and in accordance with the prospectus.
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Can a foreign investor invest in listed derivatives and in the Parallel Market? |
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Yes.
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Can a non-resident foreign investor deal with more than one portfolio manager? |
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Yes, whether the manager is a market institution licensed by the authority or a foreign portfolio manager, including a GCC portfolio manager.
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Can a foreign investor obtain financing from local banks for investments in listed securities? |
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Yes, in accordance authority’s regulations and the Saudi Central Bank (SAMA).
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Does a non-resident foreign investor need to obtain a license from the Authority to conduct dealing activities when acting as principal in listed securities? |
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There is no need to obtain a license from the Authority.
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Is a foreign investor required to submit ownership notifications to the market? |
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Any person must notify the market when they become an owner of, or have an interest in, 5% or more of any class of voting shares of a listed issuer or voting convertible debt instruments of the issuer.
Such notification must not be later than the end of the third trading day following execution of the transaction or occurrence of the event that resulted in such ownership.
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