Introduction
Saudi Arabia's tax system is unique because it distinguishes between GCC nationals and foreign investors. Understanding this distinction is crucial for your financial planning.
1. Corporate Income Tax (CIT)
Rate: 20% of net adjusted profits.
Who pays it? Non-Saudi / Non-GCC foreign investors. If a company is owned 100% by a foreigner, the entire profit is subject to 20% CIT.
2. Zakat (Islamic Tax)
Rate: 2.5% of the Zakat base (approx. net worth).
Who pays it? Saudi and GCC nationals. If a company is a joint venture (e.g., 50% Saudi, 50% Foreign), the Saudi share pays Zakat, and the Foreign share pays CIT.
3. Value Added Tax (VAT)
Rate: 15%.
VAT applies to most goods and services in KSA. Businesses with annual revenue over SAR 375,000 must register for VAT.
4. Withholding Tax (WHT)
This tax applies to payments made to non-residents for services performed in KSA.
- Management Fees: 20%
- Royalties: 15%
- Consulting/Technical Services: 5%
Conclusion
While the 20% CIT might seem high compared to the UAE's 9%, Saudi Arabia offers massive market potential and other incentives that often outweigh the tax cost.