Similar to Qatar and Dubai, Saudi Arabia taxes its investors only if their profits are earned from activities within the emirate. These activities could be generated directly by a Company, a Permanent Establishment of an overseas parent or a Joint Stock Company. In this instance taxation rate will depend on the origin of these investors; if they are non Saudi tax residents then the corporation tax rate is 20% whilst the local Saudi businesspersons are taxed based on the Zakat (which is an islamic assessment for tax purposes).
In the event that a company is owned by both Saudi and non Saudi shareholders the profits are apportioned accordingly and taxed separately.
Applicable Taxes
- Zero Tax if income is derived outside the emirate of Saudi Arabia
- Taxable Income within the Saudi Arabia: 20% Corporation Tax or for locals 2.5% Zakat (religious tax)
- Disposal of Shares - taxed at 20%
- Non Saudi employees Social Securities Tax is 2% whilst for Saudi employees is higher at 12% (10% relates to housing allowance - capped at SAR 45,000)
Local Tax Office
The local tax office is called "The Zakat, Tax and Customs Authority" and it is a modern and digitalised department.
Tax Payers and Tax Consultants can use the online platform offered for various tasks including:
Modern Approach
The taxpayer and the service providers can obtain from the income tax office electronically several information including:
E- Invoicing for everyone!
The emirate has introduced the e invoicing service where effectively all sales invoices are registered centrally. Applicable date is 1st of January 2023
The use of a sophisticated electronic solution is mandatory and via this approach all sales invoices are appropriately raised, recorded and addressed.
Double Tax Treaty Network
Company formation time frame
App.3 months
Corporate bank account timeframe
Appr. 2 months after the company formation
Composition of the Company
VAT
There is VAT in KSA (Kingdom of Saudi Arabia) at 5% for sales taking place within the Kingdom
Like in Europe, there is voluntary and compulsory VAT registration subject to sales thresholds being exceeded within 12 consecutive months.
Corporate Tax
There is corporate tax of for sales taking place within the KSA
Free Zones
Although extensively talked about, there are no free zones in KSA.
Language
Besides the income statement and balance sheet, most application forms and banking documents are in Arabic. Hence local expertise is required.
Incorporation in the Kingdom of Saudi Arabia (KSA) can be broken down in three main phases as explained below:
Decide Company Type - Limited Company, Permanent Establishment of Overseas Company or Joint Stock Partnership.
The KSA is sensitive with recruitment and has its unique particularities that must be followed. We demonstrate below the process in chronological order:
Our team of experts can facilitate any enquiry you may have from incorporating your company anywhere in the Middle East to banking, substance services and on going professional support.
At present we specialise in Dubai, Qatar and KSA (Kingdom of Saudi Arabia) company formation and compliance support services.
Accounting, audit and if applicable tax services are routinely performed to all our clients anywhere in the world. Our multidisciplinary team will ensure that other linguistic or cultural differences are welcomed and valued.
What are you waiting for?
Contact us for a free first consultation at: kt@cyprusaccountants.com.cy or + 357 22 041 380.