Saudi Arabia Taxation and Zakat
Author - U.S. Department of Commerce
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 limited liability 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.
* The Ministry of Industry and Electricity (MIE) is the main authority for industrial development. It reviews and processes applications for industrial projects. All foreign investors must obtain prior approval from the MIE before undertaking any investment.
* The Foreign Capital Investment Committee (FCIC) issues the licenses for foreign investment projects in the country.
* The Ministry of Commerce (MOC) handles commercial registrations once an investment license has been issued.
* The Saudi Arabian Standards Organization (SASO) sets product standards for imports and locally-manufactured goods.
* The Saudi Arabian Monetary Agency (SAMA) is the central bank of Saudi Arabia and sets currency exchange and monetary policy.
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