In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information
Non-Saudi taxpayer's share of a resident company or a Non-resident's income from a permanent establishment in Saudi Arabia | 20% + 2.5% Zakat |
Saudi Shareholder - Zakat | 2.5% on the higher of the zakat base (balance sheet basis) and the net adjusted profit of a Saudi or GCC shareholder following the Hijri year; while for zakat payers following the Gregorian year, the rate applicable to the zakat base is 2.577683% based on the balance sheet basis |
Businesses involved in production of oil and hydrocarbons | 85% (for investments up to USD 60 billion), 75% (for investments between USD 60 and 80 billion), 65% (for investments between USD 80 and 100 billion), 50% (for investments exceeding USD 100 billion) A tax rate of 20% applies for five years on the tax base from oil and hydrocarbon downstream activities |
Businesses involved in production exploitation of natural gas | 20% |
A non-resident company carrying out business activities in Saudi Arabia through a permanent establishment is taxed on income arising from or related to the permanent establishment.
No foreign tax relief is provided for foreign entities in Saudi Arabia.
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.
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.
The Saudi government 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).
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 for 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, which is levied at 2% for non-Saudi employees and 12% for Saudi employees (who also have to contribute with 10%), calculated on the basic wage, housing allowance and commissions (capped at SAR 45,000).
Saudi Arabia | Middle East & North Africa | United States | Germany | |
---|---|---|---|---|
Number of Payments of Taxes per Year | 4.0 | 20.8 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 104.0 | 204.0 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 15.7 | 32.1 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia standards for Islamic financial institutions and the industry.
Monthly tax periods are mandatory for taxable persons with annual revenues exceeding SAR 40 million. For all other VAT registered persons, the standard tax period is three months. The VAT return must be filed, and the corresponding payment of net tax due made, no later than the last day of the month following the end of the tax period to which the VAT return relates.
There is no individual income tax scheme in Saudi Arabia. Income tax is not imposed on an individual's earnings if they are derived only from employment in Saudi Arabia. | 0% |
Non-employment income is taxed as an entity or permanent establishment (PE). Refer to corporate tax rates. | 0% |
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Latest Update: June 2023