Taxes and Accounting in Saudi Arabia

Overview by Globlatrade.net:

Accounting Rules

Tax Year
The taxable year starts from the date the taxpayer obtains a commercial registration but taxpayer may use a different financial year beginning on the 1st January and ending on the 31st December of each year for example.
Accounting Standards
Saudi Arabia uses accounting standards issued by Saudi Organization for Certified Public Accountants (SOCPA). In case an issue is not covered by SCOPA standards, IFRS (International Financial Reporting Standards) standards are used. Banks operating in the Kingdom generally used IFRS.
Accounting Regulation Bodies
SOCPA
Saudi Accounting Society
Accounting Reports
The companies need to maintain their accounting reports, especially 'balance sheet and ‘profit and loss account'.
Publication Requirements
The ‘balance sheet' and ‘profit and loss account' need to be published every fiscal year. Many Saudi companies are making their financial reports available on internet.
Professional Accountancy Bodies
SOCPA , Saudi Organization for Certified Public Accountants
Certification and Auditing
Only licensed auditors, recognised by Ministry of Commerce and Industry can perform auditing in Saudi Arabia.

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 Shari'a standards for Islamic financial institutions and the industry.

Accounting News
EINNews.com
Saudia Online

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Tax Rates

Consumption Taxes

Nature of the Tax
There is no consumption tax or VAT or sales tax in Saudi Arabia.
Tax Rate
There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.
Reduced Tax Rate
There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.
Other Consumption Taxes
Other consumption taxes are levied at the national level and the local level e.g. gasoline tax, aviation fuel tax, liquefied petroleum gas tax, petroleum tax, motor vehicle tax, etc.
 
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Corporate Taxes

Company Tax
20% on income adjusted for tax
Tax Rate For Foreign Companies
There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.
Capital Gains Taxation
20% capital gains tax is imposed on the disposal of shares in a residential company. However, as per the new tax regulations, the capital gains on disposal of shares on the Saudi stock exchange are exempt if the shares were acquired after 2004.
Main Allowable Deductions and Tax Credit
Bad debt, repairs, natural disasters, charitable donation, R&D expenses, etc.
Other Corporate Taxes
Capital duty, Payroll Tax, Real property tax, Stamp Tax are imposed on companies in Saudi Arabia. Additionally, Saudi companies of all types and companies owned by nationals of GCC (Cooperation Council for the Arab States of the Gulf) states that conduct business in the Kingdom, and shares of Saudis and nationals of GCC states in joint companies are subject to Zakat. Zakat is an Islamic direct tax on property and income levied at a flat rate of 2.5%.
Social Security (9% of the employee's salary) needs to be paid for Saudi employees, in addition accident insurance at 2% of salary needs to be paid for both Saudi and non-Saudi employees.
The tax rate on companies (both Saudi and non-Saudi) working in the exploitation of the natural gas sector is 30%, and those involved in production of oil and hydrocarbons is 85%.

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Individual Taxes

Tax Rate

As for company taxes 20%
For a Saoudian national 2.5%
If working in the Natural Gas sector 30%
Involved in production of oil and hydrocarbons 85%
Allowable Deductions and Tax Credit
Same as for companies. For details, visit: Department of Zakat and Income Tax.
Special Expatriate Tax Regime
As for company taxes: 20%, 30% or 85% depending on the sector of activity.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the International tax treaties on the Income Tax website.
Withholding Taxes
Withholding tax rates are 5% for dividends, 5% for interest and 15% for royalties. Reduced rates may apply when there is a double tax treaty.

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Intellectual Property

National Organizations
Industrial Property Office (Patents): Directorate of Patents at King Abdul-Aziz City of Science and Technology is deemed as the "Patent Office" of the Kingdom.

Industrial Property Office (Marks): Ministry of Commerce and Industry - Trade Mark Section

Copyright Office: Ministry of Information - General Administration of Copyright.

Regional Organizations

Arab Society for Intellectual Property (ASIP)

Arab Intellectual Property Mediation and Arbitration Society (AIPMAS)
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

National Regulation and International Agreements

 
Type of property and law Validity International Agreements Signed
Patent
 
Industrial Property Law -2004
15 years, can be extended for further 5 years.
Trademark
 
The Law Of Trademarks (Royal Decree No. M/21, 7 August 2002)
Approximately nine years and eight months (ten Hegira years) Nice agreement
Design
 
Industrial Property Law -2004
10 years  
Copyright
 
Copyright Law (Royal Decree No. M/11, 30 Aug 2003)
Beetwen 25 and 50 years Berne convention
Industrial Models
 
Industrial Property Law -2004
10 years  

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Legal Framework

Independence of Justice
No, the rule of law is regularly flouted by the Saudi regime, with frequent trials falling short of international standards - secret trials are common.
Equal Treatment of Nationals and Foreigners
Foreign nationals do not have always an impartial trial from the country’s judicial system. A considerable degree of corruption exits in the country, foreign companies report that they often pay bribes to middlemen and government officials to secure business deals.
Foreign workers from Asia and Africa are subjected to discrimination and have difficulty to use the justice system.
The Language of Justice
Arabic
Recourse to an Interpreter
Having an interpreter is possible. In case of migrant workers, generally the respective consular officials arrange the translation and interpretation.
Sources of the Law and Legal Similarities
The main source of the law is Shari'a (the Islamic law) and the ‘ Quran ' is the constitution of the country. However the Basic Law that articulates the government's rights and responsibilities was promulgated by royal decree in 1992. Moreover several secular codes have been introduced and commercial disputes are handled by special committees. Saudi Arabia has not accepted compulsory ICJ jurisdiction.
Checking National Laws Online
The World Law Guide
The Library of Congress
The Middle East Information Network
Gulf-Law.com
 
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Standards

National Standards Organizations
Saudi Arabian Standards Organization (SASO)
Integration in the International Standards Network
Saudi Arabia is a member of:

 

International Standard organization (ISO)

International Electrotechnical Commission (IEC)

International Telecommunication Union (ITU)

Classification of Standards
The products covered in list of standards are classified as: toys, automotive, chemicals and electrical and electronics. Where no applicable Saudi standard exists, an acceptable international standard is approved by the SASO.
Online Consultation of Standards

Oum Al-Qura is the official gazette in which the regulations are published. For details, visit SASO website.

Certification Organizations
Saudi Arabian Standards Organization (SASO)
The International Laboratory Accreditation Cooperation of which Saudi Arabia is an affiliate member.

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Business Practices

General Information
Executive Planet
US Commercial Service – Doing Business in Saudi Arabia
Communicaid
Opening Hours and Days
The Saudi working week begins on Saturday and ends on Wednesday. Thursday and Friday are the official days of rest. Office hours tend to be 0900-1300 and 1630-2000 (Ramadan 2000-0100), with some regional variation.
 

Public Holidays

Islamic New Year Thursday, 10 January
Ashura Saturday, 19 February
Prophet's Birthday Thursday, 20 March
National Day Tuesday, 23 September
Eid Al Fitr Thursday, 2nd October
Eid Al Adha Tuesday, 9th December
 
Holiday Compensation
Muslim Holidays that occur on Friday are generally observed on the following Saturday.
 

Periods When Companies Usually Close

Eid al-Fitr holidays

Observed at the end of the holy month of Ramadan (month of fasting). The dates vary and are governed by the Islamic lunar calendar.

Eid al-Adha holidays

Observed when pilgrims arrive from around the world to perform the Hajj. The dates vary and are governed by the Islamic lunar calendar.

 

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