Tax Summaries – Saudi Arabia
A resident corporation is taxed on the income arising in the kingdom. A company is considered resident company if it is formed under the Saudi Arabian Regulations for companies.
The corporate income tax is 20% on a non-Saudi share in a resident corporation and on income derived by a non-resident from a PE in Saudi Arabia. Saudi citizens investors and citizen of GCC countries ( who are treated as Saudi nationals) and shares of Saudi governmental bodies are liable for Zakat. Zakat is charged on the company’s base at 2.5%.
The rate of income tax working on the exploitation of natural gas is 30% if the IRR is 8% or less. The rate increases gradually up to 85% if the IRR equals or exceeds 20%. Companies engaged in the production of oil and hydrocarbons is determined on the basis of capital investment as follow:
More than 100 billion: 50%
Between 80 – 100 billion: 65%
Between 60- 80 billion: 75%
Less than 60 billion : 85%
Local Income Tax
There is no local, state or provincial government taxes on income other than the regular income tax or zakat as mentioned above.
Taxation of Dividends
Dividends received are taxed as income with exceptions.
Capital gains are subject to income tax or Zakat as appropriate, at the normal tax rate. However capital gains realized from the disposal of shares in Saudi stock companies listed in the Saudi market are tax exempt, subject to certain conditions.
WHT rates varies between 5% to 20%, based upon the type of services and whether the beneficiary is a related party.
Value Added Tax
Value Added Tax is an indirect tax imposed on all goods and services at a rate of 5%, with certain exceptions applicable.
Social security is paid monthly and is computed as 2% for non-Saudi employee’s and 22% for Saudi employees the employer must contribute 12% of the employee’s salary to General Organisation for Social Insurance ( GOSI), and the employee contribute 10%.
As per the General Authority of Zakat & Taxes “Excise tax is an indirect tax levied on selective goods at various stages in the supply chain. It can be applied on production, import or sale of the goods”. The excise duty is 50% on soft drinks and 100% on energy drinks and tobacco products.
There is no personal income tax in Saudi Arabia.
Annual dependent levy of SAR 1,200 has been applied from July 2017 for dependents of expats. The amount will increase gradually on YOY basis SAR 2,400 from July 2018, SAR 3,600 from July 2019 and SAR 4,800 from July 2020.
Transfer pricing refers to the Pricing of transaction between related persons and persons under common control (referred to as “Controlled Transactions”).
As per General Authority of Zakat & Taxes “the TP By-laws are applicable to persons considered taxpayers in Saudi Arabia under the corporate Income Tax Law. Generally, this includes – without limitation – multinational enterprise groups (MNE Groups), one or many members of which are deemed a taxable person in Saudi Arabia.”
There are new compliance requirements for fiscal years ending on or after 31 December 2018, including the submission of a Controlled Transaction Disclosure Form – due within 120 days from the end of the fiscal year end and filed as part of the annual income tax declaration.
There are various transfer pricing methods set forth in article 7 of the Bylaws published by GAZT, used for calculating and submission of “disclosure form of controlled transaction.