Corporate income tax in Saudi Arabia is one of the key types of taxes imposed on establishments operating within the Kingdom. It comes with specific terms and conditions.

If you are a non-Saudi national planning to establish a business in Saudi Arabia, you may find yourself required to pay Income Tax in Saudi Arabia.

So, what is corporate income tax, who is subject to it, and how is it calculated? That’s what we’ll explore in this article.

Income Tax in Saudi Arabia: An Overview

Income tax refers to the tax imposed on a company’s profits, and many countries apply such taxes under regulated frameworks.

In Saudi Arabia, Income Tax in Saudi Arabia is only imposed on companies owned by foreign investors. Saudi nationals and citizens of Gulf Cooperation Council (GCC) countries are exempt and instead pay zakat on their working capital annually.

For mixed-ownership companies (i.e., partially owned by foreign investors), income tax is applied to the foreign-owned portion at a fixed rate of 20%.

Businesses subject to this tax must register with the Saudi tax authority to avoid penalties and financial fines.

How Much is the Corporate Income Tax?

To calculate Income Tax in Saudi Arabia, follow these steps:

1. Identify the applicable tax rate based on your company’s activity (explained below).

2. Determine the company’s total annual income.

3. Apply the tax rate to the annual income to find the total tax payable.

Who is Required to Pay Corporate Income Tax?

The Saudi tax law specifies which types of companies are subject to income tax and at what rates:

• Companies wholly owned by non-Saudis or non-GCC nationals: 20%.

• Companies in the natural gas investment sector: 30%.

• Companies in the oil and hydrocarbon sector: between 50% to 85%, depending on asset value:

  • Companies with net assets exceeding SAR 375 million: 50%.

  • Companies with net assets between SAR 200–375 million: 75%.

  • Companies with net assets below SAR 200 million: 85%.

Role of a Certified Public Accountant

Hiring a certified public accountant (CPA) may be essential for businesses in Saudi Arabia to manage their tax compliance.

A CPA can help:

• Estimate tax liabilities,

• Prepare tax returns,

• Minimize tax exposure,

• Avoid penalties and violations.

If you need professional assistance, Business Pillars offers specialized services in taxation and zakat compliance in Saudi Arabia.

Their services include:

• Tax and zakat appeals,

• Ongoing compliance monitoring,

• Internal and external audits,

• Financial statement preparation,

• IFRS reporting,

• Bookkeeping and accounting,

• Business incorporation in Saudi Arabia and Bahrain,

• Governance and limited reviews,

• Feasibility studies for startups,

• Bankruptcy support and litigation resolution,

• Local content services,

• Fraud investigation and prevention,

• Financial and management consulting.

For more details on corporate income tax rules and registration procedures, visit the official website of the Zakat, Tax and Customs Authority.

Read also:

Corporate Zakat in Saudi Arabia and How to Calculate It

Electronic Invoice: Its Requirements and How to Verify It

Local Content Certificate from the Saudi Authority for Local Content and Government Procurement

Accounting and Auditing Firms in Saudi Arabia