1. Corporate Income Tax (CIT)

Saudi Arabia's current Income Tax Law was issued in 1425H (2004), undergoing several revisions and amendments over the years. The law imposes a corporate income tax of 20% for the shares of foreign partners (shareholders) in a resident company and on non-residents conducting business in the Kingdom through a Permanent Establishment (PE) or a branch. As per Article 3 of the law, a company is considered to be a resident in the kingdom if (1) it is formed under the Saudi Companies Law or (2) its central management is located in Saudi Arabia. The rate will vary from the standard 20% for companies engaged in oil and hydrocarbon production (50%-85%). Noting that shares owned by non-Saudis in companies listed on the Saudi stock market shall be excluded from the application of this law.

Reference: Laws and By-Laws

2. Zakat

In Saudi Arabia, Zakat is an Islamic levy that is administered by the government and collected by ZATCA, with regulation in place to guide collection and implementation. The Implementing Regulation for Zakat Collection was updated with the Ministerial Resolution No. (1007) dated 8/19/1445H (29 February 2024). Regulation No. (1007) supersedes the previous one and applies to fiscal years beginning on or after 1 January 2024. Zakat is levied at 2.5% for shares owned by Saudi and GCC nationals in resident companies.

Reference: ZakatRegulation_1445.pdf (zatca.gov.sa)

3. Withholding Tax (WHT)

As per the Saudi Arabian tax law, payment to a non-resident person made by a resident or PE, from a source of income in the Kingdom, is subject to withholding tax. The tax is withheld at the source by the payer (resident or PE) and is remitted to the tax authority. WHT rates vary depending on the nature of payment and services provided, ranging from 5% to 20%.

Reference: Laws and By-Laws

Transfer pricing bylaw mandates the implementation of the arm's length principle for transactions between related entities or those under common control, ensuring that transactions between related persons or persons under common control as if they were conducted between independent persons.

Reference: W&C Standard Template (zatca.gov.sa)

For more details, common transfer pricing questions are answered on the FAQ page at the following link: FAQs (zatca.gov.sa)

1. Value Added Tax (VAT)

VAT was introduced in Saudi Arabia on 1 January 2018, with the VAT Law providing a framework for implementation in alignment with the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf. VAT is an indirect tax on consumption that is levied on the import and local supply of goods and services. In Saudi Arabia, the VAT standard rate is 15%, however, certain supplies of goods and services qualify to be zero-rated, for example, certain healthcare, educational, and financial services.

Reference: VAT Law (zatca.gov.sa)

Reference: SaudiVATlaw-bilingual (Logo) 01 copy (zatca.gov.sa)

2. Customs

Customs duties are imposed on imports at predetermined rates according to the tariff classification at the time of importation in line with the Harmonized System (HS) of classification. Customs duties are imposed either on an ad valorem basis (i.e., a percentage of the value of the goods) or a specific basis (i.e., an amount imposed on the number of units to be imported). Every importer is required to file customs declaration and other relevant customs documentation at the time of import into Saudi Arabia, as prescribed in the GCC Customs Law.

Reference: Customs Law (zatca.gov.sa)

3. Excise tax

Excise tax is a form of indirect tax on selective goods and is levied at the point of manufacture or importation. The tax applies to goods that are considered harmful to the health or environment (e.g., tobacco products, soft drinks, energy drinks, sweetened drinks).

Reference: ET_Law_Updated_Arabic.pdf (zatca.gov.sa)

4. E-invoicing

On 4 December 2021, the implementation of e-invoicing commenced in Saudi Arabia, to be rolled out in two main phases: Phase 1 (Generation) and Phase 2 (Integration). E-invoicing aims to replace the traditional paper-based invoicing with an electronic process that allows for the exchange and processing of invoices, credit and debit notes, in a structured electronic format between the buyer and seller, with oversight from the tax authority in real time. The second phase, which requires integration with ZATCA’s Fatoora platform, is currently being rolled out in waves based on the value of taxable supplies of the taxpayer.

Reference: https://zatca.gov.sa/en/E-Invoicing/Pages/default.aspx

5. Real Estate Transaction Tax (RETT)

In October 2020, RETT was introduced at a rate of 5%, replacing VAT for all real estate transactions. RETT is levied on all individuals and organizations involved in real estate disposals, therefore all transactions are taxable except those specifically exempted as per Article 3 of the RETT Implementing Regulations. The seller is responsible to pay the tax due to ZATCA and both parties will be jointly liable if the tax is not paid. RETT would also be triggered in case of transfer of shares in a real estate company, which are companies that have real estate as more than 50% of their assets or capital.

Reference: اللائحة التنفيذية لضريبة التصرفات العقارية (zatca.gov.sa)