Personal Income Taxation in Saudi Arabia
There are no personal income taxes levied in Saudi Arabia. Similarly, for income that has been sourced from within Saudi Arabia, no personal income tax is charged. However, non-employment income is mostly taxed via entities, or Permanent Establishments.
Corporate Income Taxation in Saudi Arabia
For business entities that are non-residents in Saudi Arabia, income tax is paid as a certain percentage of reported profits. However, in the case of Saudi resident companies, Zakat is levied as a Corporate Income Tax. Zakat is an Islamic assessment of tax, based on the reported wealth of a given individual.
In the case where a given business entity is owned by both, Saudi, as well as non-Saudi interests, the relevant portion of taxable income that is attributable to the non-Saudi interest is mostly subject to income tax, whereas the remainder portion (the one attributable to the Saudi interest) is calculated using the zakat assessment.
Corporate Income Tax Rate in Saudi Arabia
The applicable rate of CIT in Saudi Arabia is 20% of the adjusted net profits. Corresponding withholding tax rates vary from 5% to 20%. On the other hand, Zakat is charged on the tax base of the company, corresponding to the 2.5% of the underlying value of their assets.
Regardless of the fact that Corporate Income Tax rate is pegged at 20%, yet there is an underlying difference between two different types of business entities:
- For companies that are involved in oil, and hydrocarbon exploration, PIT is levied at variable rates between 50% and 85%.
- The tax base of the person that works towards natural gas investments is considered to be independent, with regards to other activities of the given person.
Other than the taxes mentioned above, there are no corporate or personal income taxes levied in Saudi Arabia.
Other Taxation in Saudi Arabia
- Value Added Taxation (VAT): VAT is applied as a consumption tax in Saudi Arabia at a rate of 5%. However, from 1st July 2020, this rate has been increased to 15% across most goods and services.
- Excise Taxes: Excise Taxes are levied in Saudi Arabia on different product categories at the following rates:
- Tobacco products – They are levied Excise Taxes at a rate of 100%.
- Soft Drinks – Excise Taxes are levied at a rate of 50%.
- Energy drinks – Excise Taxes are levied at a rate of 100%.
- Custom Duties: Custom Duties are levied across all imported goods and services, at varying rates. The highest rate, however, is 20%.
- Social Insurance Tax: Social Insurance Tax is paid on a monthly level on the basic wage, cash allowance disbursed, as well as commissions. However, there is an upper limit in place set at SAR (Saudi Riyal) 45,000. It is computed at a rate of 2% for non-Saudi employees. This is solely contributed by the employer. On the other hand, as far as Saudi residents (employees) are concerned, they bear a Social Insurance Tax equivalent to 22%, paid by both, the employee at a rate of 10%, and the employer at a rate of 12%.
- Real Estate Transaction Tax (RETT): RETT is levied a rate of 5%. This is imposed on the disposal value of the real estate value. This is irrespective of the condition of the property.