Corporate Tax in Saudi Arabia

As the business landscape in Saudi Arabia continues to evolve, understanding corporate taxation is paramount for companies operating within its borders. With a strategic location, robust infrastructure, and a growing economy, Saudi Arabia offers numerous opportunities for businesses to thrive. However, navigating the intricacies of corporate tax regulations is essential for compliance and strategic financial planning.

Who is subject to the corporate tax in Saudi Arabia?

In?Saudi Arabia, only foreign investors are subject to?income taxation. Most of the time, local investors, as well as citizens of GCC states, who are considered to be local citizens for local tax purposes, are subject to Zakat, which is an Islamic assessment.?

In those cases when a business is owned by both local and foreign shareholders, the portion of the taxable income attributed to the local interest must acquit the?income tax, while the local share is taxed with the Zakat assessment.

Under the Income Tax Law?in Saudi Arabia, the?income tax?must be acquitted by:

? A resident capital business to the extent of its foreign shareholding;

? A resident foreign natural individual who effectuates his or her activities in the country;

? A foreign individual who effectuates his or her activities in the country through a permanent establishment;

? A foreign individual who receives other income subject to tax from sources in the country;

? An individual who activates in the natural gas investment sectors;

? An individual who activates in the oil and other hydrocarbon production fields;

? A resident capital business in the extent of its shares owned directly or indirectly by individuals who operate in oil and hydrocarbon production.

Making the correct choices and investment implies paying a lot of attention to market trends which have been studied by our specialists who can advise on how to make informed decisions.

The capital of Saudi Arabia, with a population of almost 7 million, is a significant commercial and financial hub in the Middle East. A large portion of Riyadh’s population is foreign, which is why if you plan to immigrate to Saudi Arabia, this can be a great destination for you as an expat.

?

Other corporate taxes in Saudi Arabia include:

????Dividends tax: received dividends are taxed as income;

????Capital gains: the disposal of shares in a resident company is taxed at 20%.

????Surtax: Saudi Arabia does not impose any surtax;

????Foreign tax credit: it does not allow any foreign credit tax.

Dividends Tax:

In Saudi Arabia, dividends received by shareholders are subject to taxation as income. This means that any dividends distributed by a company to its shareholders are taxed based on the recipient's applicable income tax rate. It's essential for companies and shareholders alike to factor in dividends tax implications when distributing profits and planning for financial obligations.

Capital Gains Tax:

The disposal of shares in a resident company in Saudi Arabia is subject to capital gains tax. Capital gains tax is levied at a rate of 20% on the profit realized from the sale or transfer of shares. Companies and investors involved in share transactions must consider the impact of capital gains tax on their financial transactions and incorporate it into their overall tax planning strategies.

Surtax:

Unlike some jurisdictions, Saudi Arabia does not impose any surtax on corporate entities. This simplifies the corporate tax landscape for businesses operating in the Kingdom, as there are no additional taxes levied on top of zakat and other applicable taxes.

?Foreign Tax Credit:

Saudi Arabia does not allow for the deduction or credit of foreign taxes paid by companies or individuals. This means that businesses operating internationally or engaging in cross-border transactions may not offset their Saudi tax liabilities by the taxes paid to foreign jurisdictions. It's essential for multinational corporations and businesses with international operations to carefully consider the tax implications of their activities in Saudi Arabia and abroad.

Corporate taxation in Saudi Arabia extends beyond zakat and encompasses various other taxes, including dividends tax, capital gains tax, and foreign tax credit considerations. By understanding the intricacies of these taxes and their implications for businesses, companies can optimize their tax planning strategies, ensure compliance with regulatory requirements, and mitigate financial risks. With a clear understanding of corporate taxation, businesses can navigate the Saudi market with confidence and capitalize on opportunities for growth and success.