Zakat and Tax Regulations, Saudi Arabia

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Saudi Arabia Zakat and Tax System

The Kingdom of Saudi Arabia has a very liberal tax system; there are few taxes payable by an individual or a company and they are also at very low rates.

1. Zakat

The Zakat (a form of tithe) is paid annually by Saudi individuals and companies within the provisions of Islamic law as laid down by Royal Decree No. 17/2/28/8634 dated 29/6/1370 H. (1950). The Zakat is an annual flat rate of 2.5 percent of the assessable amount.

2. Personal Income Tax

For individual employees, both national and expatriate, there is no income tax in the Kingdom.

Self-employed expatriates such as doctors, accountants, lawyers, etc. pay taxes on their net annual income at the following rates:

Net Income (per year)	Tax Rate (percent)
First 6,000	Exempted
From SR 6,001 - 10,000	5
From SR 10,001 - 20,000	10
From SR 20,001 - 30,000	20
Over SR 30,000	30

A slab system is followed to calculate such taxes.

3. Tax on Business Income:

A company, under the tax regulations, means a company or partnership having material gain as the basic objective. The taxable incomes of companies include:

* profits of a foreign company;
* shares of non-Saudi sleeping partners in the net profits of partnership companies.

All legitimate business expenses and costs, including business losses and depreciation, are deductible in computing net profits. Any reasonable method of depreciation may be adopted by the company but the same must be adhered to from year to year. Capital gains are included in the profits of the company. The following tax rates, on a slab basis, are now in force:

Net Profit Level                                                 Tax Rate (percent)
First SR 100,000                                                             25
From SR 100,001-500,000                                             35
From SR 500,001-1,000,000                                             40
Over SR 1,000,000                                                             45

Income tax is charged at different rates for companies engaged in the production of petroleum and hydrocarbons in the Kingdom.

Every company is required to submit a financial statement on an official form and to pay the tax not later than the 15th day of the third month of the year following the Saudi Arabian fiscal year, which commences on the 10th of Capricorn (December 31).

Companies formed under the provisions of the Foreign Capital Investments Regulations with participation of Saudi capital of not less than 25 percent are exempt for up to ten years from payment of income tax.

For further details, please contact the Ministry of Finance and National Economy, Directorate of Zakat and Income, Companies Department, (see appendix I for address).