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As mentioned above, both SAMA and the CMA granted temporary experimental licences to encourage fintech growth in Saudi Arabia during the past two years. Applications for these licences are submitted to the relevant entity's sandbox programme, but the same laws govern conventional financial transactions, which are as follows:

• general banking control laws;
• general finance company control laws;
• the E-banking Rules; and
• the Electronic Transactions Law. ¹

In 2020, however, SAMA approved the introduction of new laws governing fintech activities in Saudi Arabia, including debt-based crowdfunding and payment service providers (PSPs). Although both licences are still subject to conventional financial laws, applicants can now obtain a licence based on their activities instead of simply participating in the sandbox programme with a temporary one.¹

While new licences were introduced to carry out fintech activities in Saudi Arabia, fintech transactions are still governed by conventional financial transactions laws. As such, there are no specific tax regulations that apply to fintech companies. The General Authority of Zakat and Tax generally applies zakat on local companies and tax on foreign companies. The zakat is calculated to be 2.5 per cent of the capital of the company, while foreign companies and foreign shareholders in a company are usually taxed 20 percent on their revenue, rather than their capital. Due to this, fintech companies will be required to pay the same amounts regardless of their shareholders' nationalities. As a result of applying only 2.5% on local companies' capital and 20% on foreign shareholders' revenue, Saudi Arabian tax laws are company-friendly, which means they are also fintech-friendly.¹

Neither SAMA nor the CMA require licensing for the following Fintech Saudi activities:

• aggregation of publicly available financial information;
• business tools;
• back-office bank operations;
• enhancing bank's customer experience;
• personal management;
• regulation technology (regtech), which involves the use of technology to support financial organisations to comply with financial services regulations. Fintechs can develop regtech solutions that do not conduct regulated activities but support financial organisations to remain compliant;
• gamification; and
• reward-based crowdfunding (added as an exempted activity in 2020). ¹

In this case, the CMA or SAMA licensing requirements will not apply to the conduct of these activities. In addition, credit information services, which fall under back-office bank operations, are exempt from licensing requirements since they are one of seven activities that require a license.¹

The Ministry of Culture and Information (MCI) is responsible for regulating marketing activities. Both local and international organisations must secure permission from MCI in order to advertise, whether through print or digital media. Organizations are expected to abide by the banking Consumer Protection Principles when creating promotional materials once they have obtained the appropriate licence.¹

The SAMA regulates third-party websites that provide information about financial products or compare products. These websites are currently considered brokers by SAMA and require licensing to enter its sandbox programme.¹

Crowdfunding in Saudi Arabia

Fintech in other countries

Notes

1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/saudi-arabia