Corporate Tax in Saudi Arabia
- Tax Base For Resident and Foreign Companies
- There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.
|On a non-Saudi's share in a resident company and on income derived by a non-resident from a permanent establishment in Saudi Arabia.||20% on income adjusted for tax|
|In case of Saudi shareholder.||2,5%|
|The tax rate on tax payers (both Saudi and non-Saudi) working in the exploitation of the natural gas sector.||30%|
|The tax rate on tax payers (both Saudi and non-Saudi) involved in production of oil and hydrocarbons.||85%|
- Tax Rate For Foreign Companies
A resident company is taxed on income arising in the Kingdom. A corporation is resident if it is registered in accordance with the Regulations for Companies in Saudi Arabia or if it is headquartered in the Kingdom. A non-resident company carrying out its business activities in the Kingdom through a permanent establishment is taxed on income arising from or related to the permanent establishment.
The tax rate is 20% on a non-Saudi's share in a resident company and on income derived by a non-resident from a permanent establishment 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%.
Country Comparison For Corporate Taxation
|Saudi Arabia||Middle East & North Africa||United States||Germany|
|Number of Payments of Taxes per Year||14.0||21.6||11.0||16.0|
|Time Taken For Administrative Formalities (Hours)||79.0||194.1||187.0||215.0|
|Total Share of Taxes (% of Profit)||14.5||32.8||46.8||48.2|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
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