Updated November 2023
Saudi Arabia is a popular destination for expats worldwide, offering plenty of career opportunities in industries such as oil and gas, technology, and energy. Expats of all nationalities need to understand the country’s culture and tax laws. As an expat, taking the time to familiarize yourself with Saudi Arabia’s tax regulations can help you avoid potential issues and make the most of your time working and living in the country.
Keep reading to learn more about the latest tax regulations in the Kingdom.
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Saudi Arabia income tax latest news
Saudi Arabia is considering substantial reforms to its income tax laws as part of the Vision 2030 economic agenda. The draft laws, released by the Zakat, Tax, and Customs Authority (ZATCA), aim to modernize the tax system in line with global best practices.
The proposed changes include stricter residency rules, expanded tax bases, and adherence to international standards. The reforms also introduce new withholding tax rates, deductions, and incentives to encourage green investments and Research and Development (R&D). In terms of compliance and penalties, the statute of limitations for tax assessments is reduced, and penalties for non-compliance, especially tax evasion, are significantly increased.
Public feedback is sought until December 25 to shape the final laws, emphasizing the importance of early preparation for businesses and individuals to navigate the transformed fiscal environment.
Saudi Arabia Income Tax types
The collection of the income tax rate in Saudi Arabia is levied on various sources of income such as labor, pensions, interest, and dividends and is imposed accordingly.
There is no personal income tax rate applicable in Saudi Arabia.
The corporate income tax rate in Saudi Arabia is a levy imposed on companies, calculated based on their net income generated during a typical business year while carrying out their operations. The corporate tax rate in Saudi Arabia stands at 20 percent.
Special Economic Zones
Saudi Arabia has launched several new Special Economic Zones (SEZs) with attractive incentives to encourage foreign investment in the country. These include low corporate income tax rates of 5% for up to 20 years, 0% withholding tax for repatriation of profits, and 0% customs duties and VAT for goods exchanged within the zones.
The SEZs focus on different industries such as automobile supply chain and assembly, shipbuilding and maintenance, food processing, cloud computing services, and logistics. The tax relief is available for up to 50 years in the Special Integrated Logistics Zone (SILZ), which allows 100% foreign ownership and includes exemptions for withholding and remittance taxes. These incentives aim to attract foreign investors and create job opportunities in Saudi Arabia.
Saudi Arabia income tax rates
Saudi Arabia does not impose any personal income tax. However, non-Saudi and non-GCC resident individuals are subject to a flat income tax rate of 20% on their tax-adjusted profit. Non-residents who lack legal registration or permanent establishment in Saudi Arabia are liable to withhold tax on their income originating from Saudi Arabia.
Saudi resident entities are required to deduct tax from payments made to such non-residents for their Saudi Arabia-derived income, regardless of whether they are taxpayers. The withholding tax rates for different types of payments are as follows:
- the tax rate for management fees is 20%,
- dividends, interest, rent, technical and consulting services, air tickets, freight or marine shipping, international telephone services, and insurance or reinsurance premiums are taxed at 5%
- royalties, payments to head offices or affiliated companies for services, and other service payments, the tax rate is 15%
- all other types of payments are also subject to a 15% tax rate.
Who is liable to pay tax?
Self-employed professionals and business people who generate Saudi-source income are subject to taxation. Zakat is a religious wealth tax for Saudi Arabia and other GCC countries’ resident companies. A flat tax rate of 2.5% is charged on the total capital resources and income not invested in fixed assets that have been held for over 12 months. This includes a company’s capital, net profits, retained earnings, and reserves not created for specific liabilities.
In Saudi Arabia income tax applies to the following individuals or entities:
- a resident capital company possessing shares owned by non-Saudi/non-GCC individuals and individuals operating in oil and hydrocarbon production.
- a resident non-Saudi natural person engaged in activities within Saudi Arabia.
- a non-resident person conducting activities in Saudi Arabia through a permanent establishment (PE).
- a non-resident person with other taxable income sourced from within Saudi Arabia without having a PE.
- a person involved in natural gas investment fields.
Who is exempt from paying tax?
Personal wages for employees are generally not taxed. Capital gains realized from the disposal of securities traded in the stock market in the Kingdom are exempt from income tax, subject to restrictions specified in the regulations. Profits resulting from removing property other than assets used in the activity are also tax-exempt.
Saudi Arabia payment of tax
If you earn income in Saudi Arabia, you need to pay your taxes in three installments throughout the year. These payments are called “advance tax payments,” and they’re due on the last day of the sixth, ninth, and 12th months of the year. Each payment is 25% of your expected tax liability for the year minus any taxes that have already been withheld.
If your expected tax liability is less than SAR 500,000, you don’t need to make advance payments. However, if you do need to make them and you’re late with a payment, you’ll be charged a penalty of 1% of the amount due for every 30 days that the payment is late. You also need to pay the full amount of your taxes within 120 days after the end of the tax year.