What is the Corporate Tax in Saudi Arabia?

Tally Solutions | Updated on: August 14, 2023

Corporate tax is an income tax levied on the income earned by the business. Only non-Saudi businesses are liable for corporate income tax in Saudi Arabia. If both Saudi and non-Saudi owners own a company, the portion of taxable income attributable to the non-Saudi interest is subject to income tax in Saudi Arabia. The Saudi share of income goes into the basis on which Zakat is assessed.

Tax in Saudi Arabia for resident and foreign businesses

According to the Saudi income tax law, the following are subject to income tax in Saudi Arabia:

• A resident capital company with shares owned either directly or indirectly by non-Saudi / non-GCC persons and persons operating in oil and hydrocarbon production, except for the following:
  • Shares are owned either directly or indirectly by persons working in oil and hydrocarbons production in a resident capital company listed in the Saudi stock market, and the shares are owned either directly or indirectly by these parties in capital companies.
  • Shares owned in a resident capital company listed in the Saudi stock market were acquired for the purpose of speculation through trading in the Saudi capital market.
• A resident non-Saudi natural person who carries on activities in Saudi Arabia.

• A person engaged in oil and other hydrocarbon production.

Tax Rate

The corporate income tax rate is 20% of the net adjusted profits. Zakat is charged on the company’s Zakat base at 2.5%. Zakat base represents the entity's net worth as calculated for Zakat purposes.

It should be noted that, although the income tax rate is 20%, income from the following two activities is subject to different rates: 

• Income from oil and hydrocarbon production is subject to tax in Saudi Arabia at a rate ranging from 50% to 85%.
• The tax base of a person who works in natural gas investment should be independent of the tax base relating to other activities of this person.

Other corporate taxes

There is no capital duty, stamp duty, or payroll tax in Saudi Arabia. While there is no real estate tax, Zakat (religious tax) may be payable on real estate if held for speculation. A real estate transaction tax applies to the disposal of real estate at a rate of 5%.

Zakat also applies to companies that are resident in Saudi Arabia and other GCC nations. It is levied at a flat rate of 2.5% and is chargeable on the total of the taxpayer's capital resources held for more than 12 months and income not invested in fixed assets. These include the company’s capital, net profits, retained earnings, and reserves not created for specific liabilities.

How can TallyPrime help?

TallyPrime is a business management software with a range of business modules to manage the growing needs of your business, it is qualified by ZATCA (GAZT) as a compliant e-Invoicing (FATOORA) software.

Being business ready is not what you do on the date of implementing the corporate tax in Saudi Arabia; it's about the things you should do today for a smooth shift to the corporate tax era.

TallyPrime can help your business in Saudi Arabia with its powerful integrated features including:

• Generate instant business reports related to accounting, inventory, and financial statements such as profit and loss account a/c, balance sheet, etc. that help you calculate corporate tax.
• Manage your books of accounts with ease in high accuracy and consistency.
• Create VAT-compliant invoices, while managing different types of VAT supplies such as exports, imports, etc.
• Completing VAT returns in simple few steps
• Supports e-invoices for a tax invoice, simplified invoice, debit notes, and credit notes

Ready to experience TallyPrime? Book your free demo Now, and we are sure you'll be delighted to see how TallyPrime adapts to your business.

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