Saudi Arabia's cabinet has approved a tax on undeveloped urban land and rules allowing foreign investors to own 100 per cent of retail and wholesale businesses, the official SPA news agency said on Monday.

The 2.5 per cent annual tax on the value of undeveloped land designated for residential or commercial use will be applied in stages to owners of plots exceeding 5,000 sq m, SPA quoted a cabinet statement as saying.

The measure aims to help resolve a shortage of affordable housing in Saudi Arabia by putting more unused land on the market where it can be acquired by developers.

The cabinet decided to approve the Implementing Rules of the Undeveloped Land Fees Regulation. Undeveloped lands are defined as all vacant lands dedicated to residential use or commercial residential use within the urban boundary limits.

The application of fees on lands are subject to the regulation and its rules shall be according to the following stages:
• First: undeveloped land with an area of 10,000 sq m and more, located within the range set by the ministry.
• Second: developed land belonging to one owner in an approved and one plan as long as its total area is more than 10,000 sq m.
• Third: developed land belonging to one owner in one and approved plan as long as its total area is more than 5,000 sq m.

The Ministry of Housing shall collect the applied fees in this regard as well as the fines imposed for violation of the rules or regulations, and take the necessary measures to prevent evasion of the payment of these fees and fines.

The cabinet also approved rules, originally announced last September, permitting full foreign ownership of retail and wholesale operations. Previously, the country's ownership ceiling was set at 75 per cent.

Saudi Arabia is keen to attract more foreign investment to help its economy cope with low oil prices, which have slashed state revenues.

Possible US investments in Saudi Arabia are expected to be discussed during a visit to the US this week by Saudi Arabia's Deputy Crown Prince Mohammed bin Salman and senior Saudi economic officials.-Reuters