Discover everything about corporate tax in Saudi Arabia for foreign investors. BMS Auditing offers expert consulting on tax planning, filing, and compliance to ensure your business stays competitive.
The corporate tax rate is 20%, in line with the commitment made by the country to attract more foreign investment without compromising on the competitiveness of its businesses. Saudi Arabia's corporate tax rate has varied through the years. From 1999 to 2016, it averaged 24.72%. It was 45% in 1999, but after that, it declined to 20% in 2006. The tax is imposed on foreign investors as well as mixed-ownership companies. Local investors, however, have to pay Zakat.
Who is Subject to Corporate Tax in Saudi Arabia?
Corporate tax, in Saudi Arabia, applies almost solely to foreign investors. For local investors, corporate tax usually does not apply. GCC countries exempt citizens of other states; however, those are charged by Zakat - the Islamic wealth tax. According to Zakat regulations, incomes generated within the state are not subject to corporate tax. Zakat does not impose any form of tax on any of the business operations owned partly locally.
The particulars of tax liabilities vary depending on the form of ownership of the business. Here is the segment describing the liable entities for corporate tax in Saudi Arabia:
- Resident Capital Businesses: Resident capital businesses, which are those owned by foreign interest holders, are taxed on their share of the taxed income liable to the foreign interest.
- Foreign Individuals and Corporations: All foreign individuals, who conduct any activity in the Kingdom through a permanent establishment, or receive income derived from the Kingdom, shall be subject to corporate tax.
- Natural Gas and Oil Sector Investors: Foreign investors, and companies involved in natural gas, oil or other hydrocarbon production fields are liable to pay corporate tax on income derived from these sectors.
- Foreign Ownership in Capital Businesses: If a capital business is owned by foreign individuals engaged in hydrocarbon production, the foreign share of the business is taxed under corporate tax rules.
At BMS Auditing, our experts can guide foreign investors and businesses on navigating these tax obligations and ensure compliance with Saudi tax regulations.
Other Corporate Taxes in Saudi Arabia
Apart from the base corporate income tax, several other taxation aspects hit businesses in Saudi Arabia:
- Dividend Tax: Foreign investors' dividends income is income. This, therefore, will mean that dividend income received by a Saudi company and paid out to a foreign company is tax income.
- Capital Gains Tax: The distribution of shares from a resident company is charged with capital gains tax at the rate of 20%. The tax is applicable to income derived from the sale of shares or other assets of a company located in Saudi Arabia.
- Surtax: Surtax in the Kingdom of Saudi Arabia There is no addition of surtax to corporate income.
- Foreign Tax Credit: Saudi Arabia does not accept foreign tax credits, which means that the company cannot net against taxes paid in other countries against its Saudi tax liability. This is important to businesses that might have their operations spanning borders and, therefore, have their tax liabilities in multiple jurisdictions.
Apart from the base corporate income tax, several other taxation aspects hit businesses in Saudi Arabia:
- Dividend Tax: Foreign investors' dividends income is income. This, therefore, will mean that dividend income received by a Saudi company and paid out to a foreign company is tax income.
- Capital Gains Tax: The distribution of shares from a resident company is charged with capital gains tax at the rate of 20%. The tax is applicable to income derived from the sale of shares or other assets of a company located in Saudi Arabia.
- Surtax: Surtax in the Kingdom of Saudi Arabia There is no addition of surtax to corporate income.
- Foreign Tax Credit: Saudi Arabia does not accept foreign tax credits, which means that the company cannot net against taxes paid in other countries against its Saudi tax liability. This is important to businesses that might have their operations spanning borders and, therefore, have their tax liabilities in multiple jurisdictions.
Why Choose BMS Auditing for Corporate Tax Guidance?
BMS Auditing provides services for foreign enterprises in Saudi Arabia by offering consulting and tax advice. Knowing every little detail that makes up corporate tax laws is necessary to meet compliance requirements while avoiding penalties for a profitable business.
Our team is knowledgeable in the complexities of Saudi taxation, including Corporate Tax, Zakat, and other forms of taxes affecting foreign investors. We offer a full suite of services, covering tax planning, filing, and reporting, which can help businesses navigate the regulatory landscape efficiently. Whether you are a new investor in Saudi Arabia or an established company looking to optimize your tax obligations, we can help.
Let BMS Auditing help your business in Saudi Arabia
For businesses wanting to enter the Saudi market, or expanding here, they need to learn about the prevailing tax laws prevailing in the economy and their potential implications. Let BMS Auditing help by providing you the expertise you may need to clearly understand and successfully comply with regulations on taxes levied by a country, smooth operations, and successful management of investments. Make contact with our team today in order to enlist expert tax consultations and ensure business compliance and competitiveness in this Saudi market.
