SAUDI ARABIA: TAX SYSTEM

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources
of Fiscal Information

Corporate Taxes
Tax Base For Resident
and Foreign Companies

There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.

Tax Rate

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
Credits

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%.

Other Domestic
Resources

Consult Doing Business Website, to obtain a summary of the taxes and mandatory
contributions.

Country Comparison For Corporate Taxation

Number of Payments of Taxes per

Year

Saudi Arabia

Middle East
& North
Africa

United
States

Germany

3.0

19.0

11.0

9.0

Time Taken For Administrative

Formalities (Hours)

72.0

184.0

175.0

207.0

Total Share of Taxes (% of Profit)

32.3

32.3

46.7

46.8

Source: Doing Bus ines s - Las t Available Data.

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.

Accounting Rules
Accounting System
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 Organization for Certified Public Accountants

Saudi Organization for Certified Public Accountants, There are over 278 members in this
association.

Accounting Law

Saudi Accounting Laws

Also refer to SAGIA web site.

Difference Between
National and
International Standards
(IAS/IFRS)

Saudi accounting standards are broadly based on IFRS. SOCPA adheres to the norms set by
the International Federation of Accountants. If an issue is not cover by SOCPA, the IFRS is the
standard.

Accounting News

EinNews.com
Saudia Online

Accounting Practices
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 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.

Accountancy Profession
Accountants

Saudi Organization for Certified Public Accountants (SOCPA) promotes the accounting and
auditing profession in the country. The accountancy professional can practice provided his
name is listed in the 'Register of Certified Public Accountants' with the Ministry of Commerce
and Industry. The minimum qualification for registration is a Bachelor's degree in Accountancy
or any other equivalent Certificate as may be deemed acceptable by the competent authorities
in charge of equivalency of degrees.

Professional Accountancy
Bodies

SOCPA, Saudi Organization for Certified Public Accountants

Member of the
International Federation
of Accountants (IFAC)

Yes

Member of Other
Federation of
Accountants

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

Only licensed auditors, recognized by the Ministry of Commerce and Industry can perform
auditing in Saudi Arabia.

Audit Bodies

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.

Consumption Taxes
Nature of the Tax

There is no consumption tax or VAT or sales tax in Saudi Arabia.

Standard 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.

Exclusion From Taxation

There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.

Method of Calculation,
Declaration and
Settlement
Other Consumption
Taxes

There is no VAT or other similar sales (or consumption) tax in Saudi Arabia.

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.

Individual Taxes
Tax Base For Residents
and Non-Residents

There is no personal (individual) tax in Saudi Arabia, however non-residents conducting

business in the Kingdom or deriving income from a permanent establishment in Saudi Arabia
are taxed (refer to Company Taxes).
An individual is a resident in Saudi Arabia for a tax year he/she has a permanent residence in
Saudi Arabia and is physically present in the Kingdom for a period that in total is not less than
30 days in a tax year. In case the individual does not possess a permanent residence in the
Kingdom, then he/she should be physically present in the Kingdom for a period that in total is
not less than 183 days in a tax year.

Tax Rate

As for company taxes

20%

For a Saudian national

2.5%

If working in the Natural Gas sector

30%

Involved in production of oil and hydrocarbons

85%

Allowable Deductions
and Tax Credits

Same as for companies. For details, visit: Department of Zakat and Income Tax.

Special Expatriate Tax

Regime
Capital Tax Rate

As for company taxes: 20%, 30% or 85% depending on the sector of activity.
Same rates as for corporation tax i.e 20%.

Double Taxation Treaties

Countries With Whom a
Double Taxation Treaty
Have Been Signed

See the International tax treaties on the Income Tax website., Saudi Arabia has 22 tax
treaties in force.

Withholding Taxes
Bilateral Agreement

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.
Spain and Saudi Arabia signed a Double Taxation Treaty.

Sources of Fiscal Information

Tax Authorities

Zakat and Income Tax Department (ZITD), Saudian tax department

Ministry of Finance, Ministry responsible for finance, managing the Tax department.

Other Domestic
Resources

The Saudi Network

Arab Net
Expatriate Financial Advice to Saudi Arabia
INFO-PROD RESEARCH (IPR)

Country Guides

Deloitte Tax Guide

Doing business country guide

Learn more about Service Providers in Saudi Arabia on Globaltrade.net, the Directory for International Trade Service
Providers.
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Last Updates: May 2015