Saudi Arabia - Income Tax

Saudi Arabia - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

Only individuals earning business income from self employment are required to register with the Tax authorities and file income tax returns.

Tax returns are due within 120 days from the end of financial year. For a December year end taxpayer, the due date is 30 April.

What is the tax year-end?

Most taxpayers adopt December year-end.

What are the compliance requirements for tax returns in Saudi Arabia?

  • Taxpayers are required to register with the Tax Authorites and open tax file
  • Taxpayers are required to file annual income tax retruns 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 ther 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 cocunts, 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.

Residents

Individuals are considered residents in saudi Arabia if they meet on of the following tests :

  1. He is present in Saudi for 183 days or nmore during any taxabe year, or
  2. He is present in Sayudi for at total of 30 days or more and has a place of abode in Saudi Arabia.

Non-residents

< See definition of resident >

Tax rates

Coreporate income tax of 20%.

Non resients 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%

 

What are the current income tax rates for residents and non-residents in Saudi Arabia?

Residents

Federal tax

20% flat rate

Non-residents

See WHT table

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Saudi Arabia?

Individuals are considered residents in saudi Arabia if they meet on of the following tests:

  1. He is present in Saudi for 183 days or nmore during any taxabe year, or
  2. He is present in Sayudi for at total of 30 days or more and has a place of abode in Saudi Arabia.

Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country before their assignment begins?

Days of presence before start of assignment will count towards residency days.

Termination of residence

Are there any tax compliance requirements when entering or leaving the country1?

Non residents who are shreholders in Saudi resident companies (other than companies listed on the Saudi stock exchange) and who sell their shares may be subject to capital gain tax on the disposition of these shares.

Communication between immigration and taxation authorities

Do the immigration authorities in Saudi Arabia provide information to the local taxation authorities regarding when a person enters or leaves Saudi Arabia?

Tax Authorities in Saudi may communicate with immigration to obtain informaiton about the entry and exot dates of individuals to determine PE exposure and residency.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

No.

Economic employer approach

Do the taxation authorities in Saudi Arabia adopt the economic employer approach2 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Saudi Arabia considering the adoption of this interpretation of economic employer in the future?

N/A

De minimus number of days

Are there a de minimus number of days3 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

N/A

Types of taxable compensation

What categories are subject to income tax in general situations?

Business income from self employment.

Tax-exempt income

Individuals are generally not subject to tax on any income earned from Saudi Arabia in their capacity as employees.

Expatriate concessions

Are there any concessions made for expatriates in your country?

None

Salary earned from working abroad

Is salary earned from working abroad taxed in Saudi Arabia? If so, how?

None

Taxation of investment income and capital gains

Are investment income and capital gains taxed in your country? If so, how?

No. Unless individual is earning this income as a self employed.

Gains from employee stock option exercises

No.

Foreign exchange gains and losses

None

Principal residence gains and losses

None

Capital losses

None

Personal use items

None

Gifts

None

Foreign property reporting

None

Non-resident trusts

None

Additional capital gains tax (CGT) issues and exceptions

Are there capital gains tax exceptions in your country? If so, please discuss.

Pre-CGT assets

None

Deemed disposal and acquisition

None

General deductions from income

What are the general deductions from income allowed in your country?

All regular and necessary expenses to generate the incime subject to tax provided that the expenses are:

  • Supported by documents.
  • Connected with the inccome being realized.
  • Related to the same tax year.
  • Not capital in nature.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in your country?

N/A

Calculation of estimates/ prepayments/ withholding

How are estimates/prepayments/withholding of tax handled in your country? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

N/A for individuals.

Self employed individuals may be required to pay 75% of their current year taxes in three equal instalments if their prior year tax liability exceed SAR 2m ($533,333).

When are estimates/prepayments/withholding of tax due in your country? For example, monthly, annually, both, and so on.

June 30, September 30 and December 31.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in your country? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

No.

General tax credits

What are the general tax credits that may be claimed in your country? Please list below.

Self employed individuals paying corporate income tax may claim any WHT deducted from their payments as credit against the corporate income tax.

Taxation of international executives

A global survey of income tax, social security tax rates and tax legislation impacting expatriate employees.

 
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