Taxation Laws in
Saudi Arabia
1. Income Tax: Individuals in Saudi Arabia are not subject to personal income tax on their earned income. This is one of the significant attractions for expatriates working in the country.
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2. Corporate Tax: Companies operating in Saudi Arabia are subject to corporate income tax. The standard corporate income tax rate is 20% for both local and foreign-owned companies. However, certain industries and activities may have different tax rates or tax exemptions.
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3. Withholding Tax: Saudi Arabia imposes withholding tax on certain types of payments made to non-resident companies and individuals. For example, dividends, interest, royalties, and fees for technical services may be subject to withholding tax.
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4. Value Added Tax (VAT): In January 2018, Saudi Arabia introduced a 5% VAT on the supply of goods and services. VAT is applicable to most goods and services, except for essential items like basic food items, certain healthcare services, and financial services.
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5. Other Taxes: There are other taxes, fees, and contributions that businesses might have to pay, such as social insurance contributions for Saudi and expatriate employees.
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6. Import and Export Duties: Saudi Arabia levies customs duties on certain imported goods, and the rates can vary based on the type of goods and their country of origin.
Residency status in Saudi Arabia can be broadly categorized into two main types:
Saudi Citizens
Saudi citizens are individuals who hold Saudi Arabian nationality. They have full rights and privileges in the country, including the right to live and work in Saudi Arabia without any time restrictions.
Expatriates
Expatriates, also known as non-Saudi residents or foreign residents, are individuals from other countries who come to Saudi Arabia for employment, business, or other purposes. Expatriates must obtain a valid residency permit (Iqama) to legally reside and work in the country.
As of September 2021, Saudi Arabia does not levy personal income tax, making it an appealing destination for expatriates and individuals seeking to work and live in the country without the burden of individual income tax.
However, other taxes such as VAT, corporate income tax, withholding tax, and excise tax apply in Saudi Arabia. The standard corporate income tax rate is 20%, and VAT is imposed at a flat rate of 5% on most goods and services.
Types of Income
Other Income includes miscellaneous income sources that may include prizes, awards, lottery winnings, or any other income not specifically categorized under the above types.
Types of Tax in Saudi Arabia
Types of VAT
• Standard Rate: The standard VAT rate in Saudi Arabia is 15%. It applies to most goods and services, including general
consumer goods, electronics, clothing, furniture, and services like entertainment, hospitality, and professional services.
• Zero Rate: Certain goods and services are exempt from VAT and subject to a 0% tax rate. This means that while VAT is
applicable, it is charged at 0%. Examples of goods and services falling under the zero rate include exports of goods and
services, international transportation, certain medical and educational services, and some financial services.
• Exempt Supplies: Some goods and services are entirely exempt from VAT. This means that no VAT is charged on these
supplies, and businesses engaged in providing exempt supplies cannot claim input VAT credits. Examples of exempt
supplies include residential real estate, local transportation, and certain healthcare services.
Corporate Tax Rate
VAT Return
The amount you do not include as income
Amount that you earn or receive that you don't need to declare as income.
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