Saudi Arabian Law Overview
Taxation
The General Authority of Zakat and Tax (GAZT) is the governmental agency responsible for the oversight of tax collection and assessment, including the religious tax (zakat) and VAT, in Saudi Arabia. The Dispute Resolution Committee (DRC) hears tax disputes between GAZT and tax-payers.
Saudi Arabian interests and citizens of GCC countries pay zakat, which is a religious wealth tax based on the taxpayer’s net worth, not income. The effective rate is 2.5% of the net worth of natural persons and 2.5% of total capital resources of companies.
Profits accruing to foreign investors are subject to income tax, which is regulated under the Income Tax Regulation, Royal Decree No M/1 of 15 Muharram 1425 Hejra (corresponding to 7 March 2004). Resident non-Saudis, non-GCC individuals, and most types of businesses are taxed at a flat rate of 20% of profits, however oil and hydrocarbon production income are taxed at a rate of 50% to 85%. Net operating losses may be carried forward from one year to the next. The loss which has been carried forward may be deducted from the tax base of future taxable years until the cumulative loss is fully offset. The maximum offset each year is 25% of the year’s taxable profit as displayed upon the taxpayer’s return.
Since 1 July 2020, VAT is charged at a rate of 15%.
Withholding Tax Rates
Payments to a non-resident with no permanent establishment in Saudi Arabia for any amount realized from a source in the Kingdom are subject to withholding tax. The rates are as follows:
| Type of Payment | Rate |
|---|---|
| Management fees | 20% |
| Royalties | 15% |
| Dividends | 5% |
| Interest | 5% |
| Technical Services | 5% or 15% |
| Training, recruitment and transportation services taking place in Saudi Arabia | 15% |
| Remittance of profits abroad | 5% |
Expatriate Tax
Since July 2017, a tax has been levied upon expatriates residing within Saudi Arabia and their dependents. The fee has increased exponentially each year and since July 2020 the rate has been SAR 400 per dependent per month. Companies in Saudi Arabia are currently taxed SAR 800 a month on foreign employees. This fee is discounted if the number of Saudi workers exceeds the number of foreign workers in a company’s employ.
*This Saudi Arabian Law Overview is not intended to be legal advice, and cannot be relied on as a substitute for legal advice. We make no representation that the contents of this Saudi Arabian Law Overview are or will remain accurate or current.
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