Taxes in Saudi Arabia

Taxes in Saudi Arabia Last updated on Sunday 25th April 2010

Income taxes of Saudi and expatriate employees working in the Kingdom were abolished in 1975. All Saudi citizens and all Saudi companies, however, must pay a religious tax -- zakat -- of 2.5% annually on profits and on the assessable amount for individuals.

In general, Saudi law requires that all foreign and Saudi companies pay a tax on profits earned in the country. Companies with joint-ventures having at least 25% Saudi ownership are exempt from income tax for a period of ten years.

A company's tax status is determined by the tax department of the Ministry of Finance upon receipt of the company's records and activities in the Kingdom. These records must be submitted in Arabic.

US and Saudi accounting procedures are used in auditing companies.

Different tax rates are applied to companies working in petroleum or hydrocarbon industries. The final payment to a company is dependent upon a certificate being received from the Ministry of Finance stating that the contractor is either exempt from paying taxes or has paid all the due taxes. The foreign partner in a joint-venture does not pay zakat.

In May 1993, the Minister of Finance and National Economy stated that all foreign companies, which are actively involved in the capital expansion of various industrial projects in Saudi Arabia, would be exempted from paying taxes on profits made in the Kingdom. Foreign investors are to be encouraged to reinvest their profits that accrue to them from joint-ventures. The Minister went on to say:

"The prime objective of this decision is to encourage foreign participation in industrial projects and to acquire foreign technology. Such exemption will require that foreign capital be used for the development of Saudi industries and it will be applied for a period of ten years from the date a joint company begins its industrial production."

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