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Exim Duties

Tax Structure

Tax System

Important Contacts

Important Contacts

Tax Structure

 Other Link : Customs Guide

Income taxes of Saudi and expatriate employees working in the Kingdom were abolished in 1975. All Saudi citizens and all Saudi companies, however, must pay a religious tax -- zakat -- of 2.5% annually on profits and on the assessable amount for individuals.

In general, Saudi law requires that all foreign and Saudi companies pay a tax on profits earned in the country. Companies with joint-ventures having at least 25% Saudi ownership are exempt from income tax for a period of ten years.

A company's tax status is determined by the tax department of the Ministry of Finance upon receipt of the company's records and activities in the Kingdom. These records must be submitted in Arabic.

US and Saudi accounting procedures are used in auditing companies.

Different tax rates are applied to companies working in petroleum or hydrocarbon industries. The final payment to a company is dependent upon a certificate being received from the Ministry of Finance stating that the contractor is either exempt from paying taxes or has paid all the due taxes. The foreign partner in a joint-venture does not pay zakat.

In May 1993, the Minister of Finance and National Economy stated that all foreign companies which are actively involved in the capital expansion of various industrial projects in Saudi Arabia will be exempted from paying taxes on profits made in the Kingdom. Foreign investors are to be encouraged to reinvest their profits which accrue to them from joint-ventures. The Minister went on to say:

"The prime objective of this decision is to encourage foreign participation in industrial projects and to acquire foreign technology. Such exemption will require that foreign capital be used for the development of Saudi industries and it will be applied for a period of ten years from the date a joint company begins its industrial production."

Taxes are collected by the Department of Zakat and Income Tax (DZIT). Income tax is levied on Saudi-source income of non-Saudi persons or entities.

Corporate Taxes: Corporate tax is levied on net income. No distinction is made among the various forms of business organization, and the applicable tax is computed on the same basis regardless of whether the entity is a limited liability or joint stock company of a "joint venture". Income tax on Saudi business organizations is assessed on the foreign shareholder's or partner's share of the entity's net income. Once such tax is paid, no additional taxes are levied on distributed profits.
Saudi corporate tax rates range from 25 percent (on annual taxable income of up to SR 100,000) to 45 percent (on annual taxable income of over SR 1 million).
Under current practice, supply contracts whereby a foreign, non-resident company exports goods to Saudi Arabia would not generate income subject to Saudi tax. However, supply contracts under which the foreign, non-resident company also furnishes services in Saudi Arabia would be taxable in its entirety (i.e., on income derived from the export of goods as well as provision of services), although the value of supplied goods can usually be deducted as an expense item.

Personal Income Taxes: Salary and benefits of non-Saudi employees are not subject to income tax at present. However, non-Saudis who derive income from investments in Saudi businesses or from professional activities, and who are non-residents, are taxed at rates ranging from five percent (for taxable income up to SR 16,000) to 30 percent (for taxable income over SR 66,000).
The Zakat is a wealth tax levied on Saudi and GCC nationals, wholly Saudi or GCC-owner entities, and Saudi and GCC shareholders in limitedliability companies. The rate is approximately 2.5 percent of an individual's net worth or of an entity's assets (less specified deductions).

Other Taxes: Currently, no local, regional, property or other sales taxes are imposed.

Tax Treaties: Saudi Arabia has not entered into a tax treaty with the United States. However, the United States allows tax credits for income taxes paid in Saudi Arabia.

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