A) Income tax law amendment. (b) Its income from transporting natural gas for a third party through a licensed independent pipeline. 4. (d) The tax base of each natural person is determined separately. Corporate tax in Saudi Arabia. Shares of non-Saudi partners in ‎resident capital companies shall not include shares of non-Saudis held for speculation ‎purposes through trading shares of joint stock companies in the Saudi Stock ‎Exchange. As an exception, they may disclose information only to the following bodies: (b) A person receiving information under paragraph (a) of this Article shall be required to maintain its confidentiality, and not to use it except for the purpose for which it is required. (c) The loss of the related party disallowance rule stated in paragraph (d) of Article 63 of this Law shall not be applicable to the partner's share of losses and expenses in a partnership in accordance with paragraph (b) of this Article. Ten percent (10%) of the unpaid tax if the delay exceeds thirty (30) days and does not exceed ninety (90) days of the date specified by Law. The provisions of the Implementing Regulations of Income Tax law shall apply to ‎resident capital companies with respect to shares of non-Saudi partners, whether they ‎are resident or non-resident natural or legal persons. A 20% tax rate applies to foreign companies, which are paid by the non-Saudi owner or liable shareholders. (c) A partner is deemed to have received a distribution of profit from the partnership with a value equal to the market price for the ownership of the asset transferred to him without paying its cost. (h) For purposes of this Article and Article 5 of this Law, “services” shall mean any work performed for compensation, except for the purchase and sale of goods or any other properties. 17/2/28/8634 dated 29/6/1370 H. (1950). (b) Depreciable assets are classified into groups and depreciation rates as follows: (c) The depreciation deduction for each group is determined in accordance twith paragraphs (d) to (l) of this Article. The effective rate is 2.5% of the net worth of natural persons and 2.5% of total capital resources of companies. Income tax is not imposed on an individual's earnings if they are derived only from employment in Saudi Arabia. He has a permanent place of residence in the Kingdom and resides in the Kingdom for a total period of not less than thirty (30) days in the taxable year; He resides in the Kingdom for a period of not less than one hundred eighty-three (183) days in the taxable year. (b) An objection shall not be considered valid unless the taxpayer has paid the dues for undisputed terms within the period specified for objection, or has obtained an approval to pay the tax in installments in accordance with Article 71 of this Law. The tax rate applicable to the taxpayer's natural gas investment tax basis will be in accordance with the following table: [see pdf attachment]. Cumulative annual cash flows shall mean the aggregation of the annual cash flows of the taxpayer subject to the natural gas investment tax for each year starting from the first year of its tax declaration in which the taxpayer was subject to the natural gas investment tax until the year preceding the year in which the tax declaration is due for presentation. a non-Saudi resident natural person who conducts business, a non-resident person who conducts business in the Kingdom through a permanent establishment, Movable industrial and agricultural buildings: ten percent (10%), Factories, machines, engines, hardware and software (computer software) and equipment, including passenger cars, and cargo vehicles: twenty-five percent (25%), Expenses for geological surveying, drilling, exploration, and other preliminary work to exploit natural resources and develop their fields: twenty percent (20%), All other tangible and intangible depreciable assets not included in pervious categories, such as furniture, planes, ships, trains and goodwill: ten percent (10%). The information shall include names and addresses of the two parties, subject of contract, its value and financial terms, and execution and completion dates. (h) If the balance of the value of the group at the end of the year, after allowing for the deduction in accordance with paragraph (d), is less than one thousand riyals (SR1,000), the amount of the balance may be deducted. This Law shall be published in the Official Gazette and shall come into effect after ninety days from its publication date. (b) The income tax amount paid by a taxpayer on natural gas investment tax base in accordance with paragraph (a) of this Article shall be deducted from the natural gas investment tax to be paid by the taxpayer. (a) The Department shall, through the competent body, sell properties seized in accordance with provision of seizure. The partner is treated as having disposed of part of all of his share in the partnership, if the estimated distribution exceeds the partner's cost base in the partnership. (d) The Department and the taxpayer may appeal the decision of the Preliminary Objection Committee before the Appeal Committee within sixty days from the date of receiving the decision. If he is a partner in a partnership and he, either alone or together with a related person or persons under this Article, controls fifty percent (50%) or more of the rights to its income or capital, either directly or indirectly through a subsidiary company or companies of any type. (a) If a taxpayer recoups expenses, loss, or previously permitted bad debt, the amount recouped is included in the gross income for the year in which it is recouped and shall take the status of the income related to the expenses. If he withholds tax, but fails to pay the tax to the Department as required. (a) The tax rate of the tax base is twenty (20) percent for each of the following: (b) The tax rate of the tax base for a taxpayer engaged only in natural gas investment activities is thirty (30) percent. (a) The taxpayer may object to the Department's assessment within sixty days of receipt of the assessment letter. The Regulations shall specify the conditions and restrictions for such remuneration. Any remaining amount shall be returned to the taxpayer. (a) Every person subject to tax in accordance with this Law shall register with the Department before the end of its first fiscal year. The natural gas investment tax basis shall be the gross income referred to in Article 46 of this Law, minus the expenses deductible under this Law. (b) The tax base of a resident non-Saudi natural person is his taxable income from any activity from sources within the Kingdom, minus expenses permitted under this Law. (b) Any person, including banks and financial institutions, holding in possession a seized asset, shall deliver the asset to the Department upon its request. The amounts of royalties and surface rentals shall be considered as deductible expenses. by the law. 699 dated 29/7/1410 [24 Feb. 1990], as amended by Ministerial Decision No. If the amount paid to him exceeds the market price, the excess amount shall be considered as distribution to the partner by the partnership. (b) A partner shall take the cost base of the asset which equals the market value of the asset. Taxable income is the gross income including all revenues, profits, and gains of any type and of any form of payment resulted from carrying out an activity, including capital gains and any incidental revenues, minus exempted income. Dividends, management or directors' fees paid by a resident company. (b) The cost base increases by the amount of a partner's share in a partnership's income (along with his exempt income) included in the partner's gross income. Article 31: Indirect Payments and Benefits. (b) From the sales returns, the expenses of the seizure and sale shall be paid first, then tax and fines. 5122 dated 24/12/1441 AH corresponding to August 14, 2020 has been issued to amend Article (1) Para. (f) The Appeal Committee's decision shall be final and binding unless appealed before the Board of Grievances within sixty days from the notification of the decision. The declaration shall be subject to procedural rules, including fines imposed on tax declarations in accordance with this Law. In the recent notification issued by the authority, an amendment has been made to Paragraph 'a' of Article 2 of the Saudi Income Tax Law. Amending depreciation groups and rates stipulated in Article 17 of this Law. (b) A person withholding tax under this Article shall comply with the following: c) The person responsible for withholding tax under this Article is personally liable to pay the unpaid tax and any delay fines resulting therefrom, in accordance with paragraph (a) of Article 77 of this Law, if any of the following cases applies to him: (d) In addition to what is stated in paragraph (b) of this Article, if tax is not withheld in accordance with the provisions of this Article, the beneficiary remains indebted to the Department for the amount of the tax and the Department may recover it from him, his agent or sponsor. (b) The Department has the right not to allow a deduction if the taxpayer is unable without reasonable excuse to produce a document of the expense or evidence supporting the legitimacy of its claim for the deduction. A person who does not provide the Department with what is required under this paragraph, or does not notify the Department of the date of cessation of work stated in the contract, is jointly liable for any tax claim due on the contract. (a) The taxable year is the State's fiscal year. The Department: Department of Zakat and Income Tax, Tax: Income tax imposed in accordance with this Law, Taxpayer: Any person subject to tax in accordance with this Law, Activity: A commercial activity in all its forms, or any vocational, professional or other similar activity for profit. Such equipment shall be subject to depreciation under Article 17 of this Law. 153/M dated 5/11/1441AH corresponding to June 26, 2020 has been issued approving the ministers’ Council Resolution No. (e) The provisions of this Law relating to collection of tax and its mandatory procedures shall apply to advance payments of tax as they apply to the tax itself. ... Social insurance or any other contributions due on the employees as provided for by law. Shares of non-Saudis in mixed companies, which are partners in resident ‎capital companies, are not considered Saudi shares for the purposes of this Law. (g) If tax is withheld for an amount paid to a taxpayer which is included in its tax base, the tax withheld shall be deducted from the tax due on the taxpayer against the tax base. Only non-Saudi investors are liable for income tax in Saudi Arabia, and GCC nationals are considered as Saudi citizens for tax purposes. a) Amendments to the Saudi Income Tax and Zakat By-Laws . Generally, the maximum corporate income tax rate is 20 percent. The Provisions of the Implementing Regulations shall also apply to natural or legal ‎nonresident persons, whether Saudis or non-Saudis, who conduct business in the ‎Kingdom through a permanent establishment or generate income within the Kingdom.‎​, You can access the Implementing Regulations of Income Tax law by visiting the following link:​ ​Incom​e Tax System​​. It shall also be responsible for filing notifications and statements required in relation to its types of activity. This includes marine or semi-marine areas that are under the sovereignty, sovereignty rights or jurisdiction of the Kingdom in accordance with International Law, Capital company: A joint stock company, a limited liability company, or a company limited by shares. (d) A company which keeps or is required by Law to keep commercial books must record income and expenses on an accrual basis. Only non-Saudi investors are liable for income tax in Saudi Arabia, and GCC nationals are considered as Saudi citizens for tax purposes. Under current practice, supply contracts whereby a foreign, non-resident company exports goods to Saudi Arabia would not generate income subject to Saudi tax. Abstract Art. A taxpayer shall calculate the book value or the stock by use of the weighted average method. The Department may continue with the procedures of seizure after the passage of twenty days from the taxpayer's receipt of the Department's noticeof its intention of seizure. Labour laws in Saudi Arabia: Saudi Arabia’s labour laws have been reformed by the country’s Ministry of Human Resource and Social ... No Income Tax on … (l) Where an asset owned by a taxpayer is converted to personal use or otherwise ceases to be used in the generation of income, the taxpayer is deemed to have disposed of the asset for its market value, with the recognition of the resulting gain but not the loss. Article 40: Transfer of Property to a Partnership. A taxpayer is subject to income tax stipulated under paragraph (b) of Article 7 of this Law on the following: (a) Its income from processing and fractionation of natural gas in a licensed independent plant. The Department is the body responsible for the administration, examination, assessment, and collection of income tax. (e) If an individual taxpayer splits its income and divides it with another person, the Department may adjust the tax base of the taxpayer and the other person to prevent any reduction in the due tax. (a) without prejudice to paragraph (b) of this Article, a taxpayer who realizes income in the taxable year shall pay three advance payments of tax on or prior to the last day of the sixth, ninth and twelfth months of the taxable year. (a) Every resident, whether or not a taxpayer according to this Law, and any permanent establishment of a non-resident in the Kingdom which pays an amount to a non-resident from a source in the Kingdom, shall withhold tax from the paid amount according to the following rates: In the case of amounts paid by a natural person, the conditions for withholding stipulated under this Article shall apply to the payments pertaining to his activity. Without prejudice to the Certified Accountants Law, the Department may prosecute any certified accountant proven to have presented or certified false statements, which constitutes a violation of established accounting principles with the intention of assisting the taxpayer to evade all or part of the tax. It is formed in accordance with the Companies Law; Its central management is located in the Kingdom. (j) Where a land is bought or sold with constructions thereon, the value shall be reasonably apportioned to arrive at a separate value of the construction. (c) If a partner retires from membership in a partnership and receives a distribution causing him to incur a loss by disposing of his share in the partnership, the cost base of the partnership's losing assets shall be adjusted by reducing the value of the loss incurred, provided that the cost base of such assets is not less than zero. Depending on the type of business, tax rates may differ across sectors. (b) A natural person is considered related to companies of any type in the following circumstances: (c) Companies and agencies are deemed under common control if the same person or related persons control fifty percent (50%) or more according to this Article as follows: Article 65: Statutory Period of Tax Assessment. See Taxes on corporate income in the Corporate summary for more information on the taxation of non-employment income . (b) gains resulting from disposal of property other than assets used in the activity. (a) An employer's contributions to an authorized retirement fund established in accordance with the laws of the Kingdom may be deducted in favor of the employee. submitting false books, records, accounts or documents that do not reflect the true status of the taxpayer. The gross income of a taxpayer includes any payment from which the taxpayer benefits directly or indirectly, as well as any payment dealt with according to its instructions, if such payment is considered income of the taxpayer if paid to the taxpayer directly. Article 9: Gains and Losses on Disposal of Assets. Saudi Arabia: Income Tax Law Date of adoption 6 March 2004 Entry into force In effect Text versions Arabic Source: – Kingdom of Saudi Arabia Bureau of Experts at The Council of Ministers, accessed: 21 May 2013. (a) A tax shall be imposed on the shares of general partners in a partnership limited by shares, as in a partnership. - The income-tax, including any surcharge thereon; (hereinafter referred to as “Indian tax”); (b) in the case of the Kingdom of Saudi Arabia: - The Zakat - The income-tax including the natural gas investment tax; (hereinafter referred to as “ Saudi tax”). (a) Natural gas investment activities shall mean the exploration, production, collection, treatment, processing, fractionation of natural gas liquids, production and collection of gas condensates, as well as transportation of natural gas, its liquids and gas condensates. (c) An amount becomes payable by the taxpayer when all facts determining liability have occurred. (b) The partner is considered an owner of a share in the partnership according to market prices and the amount paid to him. The Minister shall have the following powers: The Embassy of The Kingdom of Saudi Arabia (b) Adding back non-cash items deducted for the purpose of determining the taxpayer's base. The following words and phrases, wherever mentioned in the Law shall have the meanings ascribed thereto hereunder unless the context indicates otherwise. If it is derived from immovable property located in the Kingdom, including gains from the disposal of a share in such immovable properties and from the disposal of shares, stocks or partnership in a company the property of which consists mainly, directly or indirectly of shares in immovable properties in the Kingdom. Article 76: Fine for failure to file the declaration. The Dispute Resolution Committee (DRC) hears tax disputes between GAZT and tax-payers. The key aspects of these amendments are summarized below. Wherever they appear in this Law, each of the following words or terms will carry the meaning beside it unless the context indicates otherwise. The natural gas investment tax rate for any taxable year shall be determined on the basis of the internal rate of return on the cumulative annual cash flows of the taxpayer derived from natural gas investment activities. Washington, DC 20037, Regular Business Hours (a) A net operating loss may be carried forward to the taxable year following the year in which the loss is incurred. If the income is attributable to a permanent establishment of a non-resident located in the Kingdom, including income from sales in the Kingdom of goods of the same or similar kind as those sold through such a permanent establishment, and income from rendering services or carrying out another activity in the Kingdom of the same or similar nature as an activity performed through such a permanent establishment. (a) A taxpayer may deduct bad debts arising from sales of goods or services that have been previously declared as a taxable income of the taxpayer. Consulate/Visa Section: (202) 944-3126 (b) A partner's share in a partnership's income, loss, expenses, and debt shall be taken into account for the purpose of determining the tax base of the partner's taxable year in which the partnership's taxable year ends. Expenses for purchase of land or equipment used for research may not be deducted. Operational losses incurred by the taxpayer during a tax exemption period may not be carried forward. (a) For the purpose of tax determination, the Department may: (b) The Department may make assessment due on the taxpayer using the estimated tax method according to facts and circumstances pertaining to the taxpayer if the taxpayer fails to file its declaration on time or keep precise accounts and records, or to comply with the form, pattern and method required in its books and records. Article 1: Definitions (a) The cost base of a partner's share in a partnership shall be determined by the amount the partner pays against his share plus the cost base of properties he contributed to the company. Shares of non-Saudis in mixed companies, which are partners in resident ‎capital companies, are not considered Saudi shares for the purposes of this Law. Commercial Office: (202) 337-4088 Employee’s contributions to thrift funds or loans due to such funds. Article 16: Research and Development Expenses. filing a declaration on the basis of unavailability of books or records, and including therein information that contradicts what is shown in the taxpayer's books and records. A resident is not subject to any tax on employment related income or salary. by shafprince March 1, 2017, 6:30 pm 1.1k Views. The new fee will be 100 Saudi riyals (SAR) per dependant per month, around £21 or $27. (a) In addition to the penalties stipulated in Article 76 of this Law and in paragraph (b) of this Article, the taxpayer shall pay a delay fine of one percent (1%) for every thirty days of delay on unpaid tax, including delay in payment of tax required to be withheld and advance payments. (a) Following the freezing, the Department may issue notices to a third party, including the employer, banks or financial institutions, ordering direct payment to the Department of any funds that the third party owes the taxpayer on or after the date of receipt of the freezing notification. (c) For purposes of this Article, a payment made by a permanent establishment of a non-resident in the Kingdom is considered as if paid by a resident company. That does not include local distribution networks and pipelines constructed by non-gas producers beyond the official sale points. (b) The market value of non-cash property transferred to an employee or any other service provider is determined without regard to any restriction on transfer of ownership. registering with the Department and paying the amount withheld to the Department within the first ten days from the month following the month of payment to the beneficiary. (f) Expenses incurred to alter or improve a non-depreciable asset are added to the cost base of the asset. Amounts paid against services rendered by a resident company to the company's head office or to an affiliated company. Cultural Mission: (703) 573-7226 In the case of an overpayment of tax, the taxpayer is entitled to a refund of the excess amount together with a compensation at the rate of one percent (1%) for each thirty days, beginning thirty days after its claim and continuing until the taxpayer receives the amount. (a) Income tax stipulated under paragraph (b) of Article 7 of this Law shall be applied to natural gas investment tax base of a taxpayer subject to natural gas investment tax. Saudi Arabia issued a Ministerial Resolution (MR) No. (b) The tax base of a resident non-Saudi natural person is his taxable income from any activity from sources within the Kingdom minus M/131, dated 20 September 2017G, (29-12-1438H) amending certain articles of the Income Tax Law (ITL). Unless otherwise provided for by this Law, the loss deduction is suspended until the related party disposes of the properties to another unrelated party. 153/M dated 5/11/1441AH corresponding to June 26, 2020 has been issued approving the ministers’ Council Resolution No. Such branches shall declare their gross income in the Kingdom at the times specified by Law. (a) Income is considered accrued in the Kingdom in any of the following cases: (b) The place of payment of the income shall not be taken into account in determining its source. (b) An amount becomes payable to the taxpayer when the taxpayer is entitled to receive it, even if payment is postponed or paid in installments. Article 59: Confidentiality of Information. (b) In case of a change of fifty percent (50%) or more in the ownership or control of a capital company, the share of a non-Saudi may not be deducted in losses incurred prior to the change in accordance with Article 21 of this Law in taxable years following the change. (b) Transportation shall mean transporting natural gas from treatment plants to processing and fractionation plants or from any such plants to end user facilities, as well as transporting gas condensates and its liquids. (b) The cost of goods sold during the taxable year shall be deducted. (b) The percentage of work completed is determined by comparing the costs of the contract incurred during the taxable year with the total estimated cost of the contract. The Zakat is an annual flat rate of 2.5 percent of the assessable amount. Understanding withholding tax in the Kingdom of Saudi Arabia (KSA) By Simon Dawson on 26 Feb 2018 Under the law and tax regulations of the Kingdom of Saudi Arabia (KSA), there is an obligation for all clients to pay withholding tax (WHT), on all ‘out of kingdom’ international payments to non-Saudi resident/registered parties/companies direct to the General Authority of Zakat and Tax (GAZT). (c) Gas condensates shall mean condensates in their natural form, which are hydrocarbons that exist in a single gaseous phase in reservoirs with original temperatures in the range between the critical and maximum temperatures, where it is possible for the substance to have two phases side by side and which are extracted from wells completed in gas condensate reservoirs and become liquid at standard conditions of temperature and pressure. not declaring one or more of the taxable activities. The Dispute Resolution Committee (DRC) hears tax disputes between GAZT and tax-payers. (e) The value of the closing stock is the book or market value, whichever is lower at that date. (c) Information concerning a taxpayer may be disclosed to another person with the taxpayer's written consent. (c) The following taxpayers shall be required to file a tax declaration: (d) A taxpayer who ceases business activity is required to notify the Department and to present within sixty days from the cessation date a tax declaration for the short taxable period ending with the date on which it ceases business. (f) For the purpose of this Article, income splitting means: (g) In determining whether the taxpayer is seeking to split income, the Department may consider the value given by the transferee. The US does not have a treaty for taxes with Saudi Arabia. (a) The tax base of a resident capital company is the shares of non-Saudi partners in its taxable income from any activity from sources within the Kingdom minus expenses permitted under this Law. A Royal Decree No. a non-resident with other taxable income from sources within the Kingdom. The tax base from branches of foreign airlines operating in the Kingdom shall be considered five percent (5%) of the gross income realized in the Kingdom from tickets, cargo, mail or any other income. real estate ownership and exclusions] Corporate Income Tax [2004] Labor and Workmen Law [1969] Cooperative Insurance Companies Control Law [2003] Law of Printing and Publication [2003] Commercial Data Law and Regulations [2002] • The Saudi tax authority, the Department of Zakat and Income Tax (DZIT), will issue guidelines on transfer pricing for transactions between related parties that meet international standards (zakat refers to a tax based on Islamic law, that constitutes giving to charity). Saudi Arabia’s Minister of Finance issued Ministerial Resolution (MR) No. Issuing instructions and taking measures he deems necessary for the implementation of this Law. Article 19: Expenses for Geological Surveying and Preliminary Work for the Extraction of Natural Resources. A flat income tax rate of 20% is applied to the tax-adjusted profit of resident non-Saudi and non-GCC individuals. It shall be calculated from the tax due date until the date of payment. Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. Granting remunerations upon recommendations by the Department's Director-General to employees for outstanding performance of their work. Article 71:Payment of Tax in Installments. Further, he or whomever he delegates may revoke the installment arrangement if he find that the accruals of the Public Treasury are subject to loss. A partnership's loss suspended in accordance with paragraph (d) of Article 63 of this Law shall not be distributed among the partners until its conditions are fulfilled. (e) A taxpayer whose taxable income exceeds one million riyals (SR 1,000,000) shall have a certified accountant licensed to practice in the Kingdom certify the correctness of the declaration. a person engaged in the field of natural gas investment. If he is a partner in a capital company and he, either alone or together with a related person or persons under this Article, controls fifty percent (50%) or more of the voting rights or its value, either directly or indirectly through a subsidiary company or companies of any type. The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year, unless it is stipulated to be a long fiscal year in accordance with the Companies Law. The Kingdom of Saudi Arabia Excise Tax Law Chapter 1: Introductory Provisions Article 1: 1. (f) fines and financial penalties paid or payable to any party in the Kingdom, excluding those paid for breach of contractual conditions and obligations. destroying or hiding books, records or documents prior to the Department's examination. The taxpayer shall file separate tax returns and audited closing accounts for each gas exploration and production contract or agreement. Article 20: Contributions to an Authorized Retirement Funds. (b) The Council of Ministers shall issue a resolution, pursuant to a recommendation by the Minister, to from an Appeal Committee to review the taxpayer's or the Department's appeals to tax-related decisions issued by the Preliminary Objection Committees. Saudi Arabian interests and citizens of GCC countries pay zakat, which is a religious wealth tax based on the taxpayer’s net worth, not income. Abstract Art. (j) In determining the tax base, no gain or loss is taken into account on an involuntary disposal of an asset, to the extent that the compensation value is used in purchasing an asset of the same kind within one year of the involuntary disposal.