Updated on: Jan 31st, 2024
5 min read
Zakat, Tax and Customs Authority (ZATCA) introduced the corporate tax in Saudi Arabia. The intention is to charge tax on the income earned by the business. Currently, there is no income tax scheme for Individuals in Saudi.
This article explains corporate tax in Saudi Arabia, including what it is, who should pay, the tax rate, and other corporate taxes.
The non-Saudi investors should pay corporate income tax in Saudi Arabia. However, the Saudi citizen investors and citizens of the GCC countries (considered Saudi citizens for Saudi tax purposes) are liable for Zakat and Islamic assessment.
Suppose a business is owned by Saudi and non-Saudi investors; the portion of income attributable to the non-Saudi investor is subject to corporate tax. Further, ZATCA considers Saudi owner’s income for assessing Zakat.
Under the Saudi Arabia income tax law, the following are subject to income tax:
Saudi corporate income tax rate is 20% of the net adjusted profits. Further, Zakat is charged on the company’s Zakat base at 2.5%. Zakat base means the business’s net worth calculated for Zakat purposes.
Even though the corporate income tax rate is 20%, income from the below two activities is subject to different rates:
Zakat applies to companies resident in Saudi and other GCC nations @ 2.5%.
Saudi Arabia has no stamp duty, capital duty, or payroll tax. While there is no real estate tax, those businesses may have to pay Zakat on real estate if it is held for speculation. Further, a real estate transaction tax of 5% should be paid when a real estate is disposed of.