Saudi Arabia

Thinking Beyond Borders for Saudi Arabia

Thinking Beyond Borders for Saudi Arabia

January 2021 

Income tax  |  Social security  |  Compliance obligations  |  Other issues

Income tax

Liability for income tax

According to Saudi tax law (effective from July 30, 2004) resident capital companies (on non-Saudi/GCC shareholders’ share) and non-residents who have business activities in the Kingdom through a permanent establishment, are subject to corporate income tax in Saudi Arabia at a rate of 20%. A company will be considered a resident company if it is formed under the Saudi Companies Regulations, or if its central control and management is situated within the Kingdom.

Tax trigger points for employment income

Income subject to tax is the gross amount of income and includes income, profits, gains of any type and any form of payment arising from carrying out activity. Gross income includes capital gains and incidental income but excludes certain exempt income.

Tax rates

There is a 20% corporate income tax rate in Saudi Arabia.

Non-residents receiving income from Saudi source may be subject to withholding tax at rates ranging from 5% to 20% depending on the nature of the service:

Management fees

20%

Royalties, consultancy and technical services and international telecommunication services paid to head office or an affiliated company

15%

Payments against services to the head office or to a related party

15%

Consultancy and technical services and telecommunication services (other than payments to head office or an affiliate), rent, air tickets or airfreight or sea freight,

dividends, interest on loans, insurance or re-insurance premiums

5%

Any other payments

15% 

Social Security

Liability for social security

Type of employee

Pension

Unemployment

Occupational Hazardous

 

Employer share

Employee Share

Employer share

Employee share

Employer share

Employee share

Saudi citizen

9%

9%

1%

1%

2%

N/A

Non Saudi Citizen

N/A

N/A

N/A

N/A

2%

N/A


*Pension, unemployment and occupational hazardous contributions are calculated as a percentage of basic salary and housing allowance.

Employment insurance

See above.

Compliance obligations

Employees’ compliance obligations

Only self employed individuals are subject to income tax in Saudi Arabia.

Taxpayers are required to register with the Tax Authorities and open tax file:

  • Taxpayers are required to file annual income tax returns within 120 days from the end of financial year
  • taxpayers may be required (upon request by the Tax Authorities) to submit financial statements audited by a Certified Public Accountant licensed in Saudi Arabia of their activities in Saudi Arabia
  • taxpayers are required to maintain their accounting records in Arabic language
  • As an alternative for filing tax returns based on regular accounts, taxpayers may request approval to file tax returns on deemed profit basis. The rates of deemed profit range from 10% to 85% depending on the nature of the activities.

Employers reporting and withholding requirements

None.

Immigration

Work permit/visa requirements

Individuals are required to obtain work permits to be able to work in Saudi Arabia.

Other Issues

Double taxation treaties

Double Tax Treaties To Which Saudi Arabia is a Party, Currently In Force

Treaty Country

Effective Date

Treaty Country

Effective Date

Austria 

01-Jan-08

Pakistan

01-Jan-07

Belarus

01-Jan-11

Russia

01-Jan-11

China (PRC)

01-Jan-07

South Africa 

01-Jan-09

France 

01-Jan-81

South Korea 

01-Jan-09

Greece

01-Jan-11

Spain

01-Jan-09

India

01-Jan-07

Syria 

01-Jan-10

Italy

01-Jan-10

Turkey

01-Jan-10

Malaysia

01-Jan-08

United Kingdom

01-Jan-10

Netherlands

01-Jan-11

Japan

01-Jan-12

Ireland

01-Jan-13

Bangladesh

01-Jan-12

Ukraine

01-Jan-13

Malta

01-Jan-13

Poland

01-Jan-13

Romania

01-Jan-13

Indirect taxes

There are currently no indirect taxes except for custom duties on certain imports which is levied at rates ranging from 5% to 20%.

Transfer Pricing

There are currently no formal transfer pricing rules in Saudi Arabia. However, the Saudi Tax Authorities are in the process of introducing transfer pricing regulations that are in line with the current international rules.

Local data privacy requirements

Natural and corporate persons, including governmental bodies, are required to provide the tax authorities with information regarding service and supply contracts and any amendments to these contracts that are concluded with any person from the private sector within a period not exceeding 3 months from the date of signing the contract.

Exchange control

Currently there are no exchange controls in Saudi Arabia.

Non-deductible costs for assignees

Disclaimer

All information contained in this document is summarized by KPMG Professional Services, a Saudi Arabia, a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited.