(d) Debt incurred by the partnership, including the debt against its properties, increases each partner's cost base according to his share in the partnership. (a) A taxpayer, other than a non-resident with no permanent establishment in the Kingdom, shall maintain in Arabic the necessary commercial books and accounting records for precise determination of the tax payable by it. (b) The Department may make or amend an assessment within ten years of the deadline specified for filing the tax declaration for the taxable year if a taxpayer does not file its tax declaration, or it is found that the declaration is incomplete or incorrect with the intent to tax evasion. Any word or phrase with no specific definition in this Chapter shall have the same definition it has in other Laws applicable in the Kingdom provided that such definition is not inconsistent with the provisions of this Law. Ministerial decision, 15 Muharram 1425 (March 6, 2004), Effective 13 Jumah II 1425 (July 30, 2004). (d) A person not complying with the provisions of paragraphs (b) and (c) of this Article is obligated to pay the Department an amount equal to the value of the properties in its possession, not exceeding the amount for which the freezsing was made. If it is derived from immovable property located in the Kingdom, including gains from the disposal of a share in such immovable properties and from the disposal of shares, stocks or partnership in a company the property of which consists mainly, directly or indirectly of shares in immovable properties in the Kingdom. Article 18: Expenses of asset repair and improvement. (g) If tax is withheld for an amount paid to a taxpayer which is included in its tax base, the tax withheld shall be deducted from the tax due on the taxpayer against the tax base. (b) A taxpayer's natural gas investment tax base shall be independent of the tax base for its other activities that are not related to its natural gas investment activity, and such taxpayer shall file a tax declaration and audited closing accounts for its natural gas investment tax activity separate from its other activities. a person engaged in the field of oil and hydrocarbons production. (a) The taxpayer may object to the Department's assessment within sixty days of receipt of the assessment letter. (c) The cost base decreases, but not below zero, by the cost of distributions from the partnership to the partner and by the partner's share of partnership losses, and expenses as well as nondeductible expenses of the partnership, except for capital items. (b) A notice may be issued on the taxpayer's employer, and its validity may be limited to a specified period. Monday - Friday 9:00am–5:00pm, Main Number: (202) 342-3800 (b) gains resulting from disposal of property other than assets used in the activity. This Law shall apply to taxable years beginning after the date of its coming into force. construction sites, assembly facilities, and the exercise of supervisory activities connected therewith; installations or sites used for surveying for natural resources, drilling equipment, or ships used for surveying for natural resources, as well as the exercise of supervisory activities connected therewith; a fixed base where a non-resident natural person carries out business; a branch of a non-resident company licensed to carry out business in the Kingdom. A natural gas investment tax shall be imposed on every person engaged in natural gas investment, gas liquids and condensates within the Kingdom, its exclusive economic region or its continental shelf. The amounts of royalties and surface rentals shall be considered as deductible expenses. (j) Where a land is bought or sold with constructions thereon, the value shall be reasonably apportioned to arrive at a separate value of the construction. Compensation amounts received shall take the character of what is compensated for. Canceling tax debt and fines that have been determined un-collectable. If it is derived from the disposal of shares or a partnership in a resident company. Cultural Mission: (703) 573-7226 Issuing instructions and taking measures he deems necessary for the implementation of this Law. A) Income tax law amendment. 687 dated 2/11/1441AH corresponding to June 23, 2020 which provides an approval of the amendment to Article (2) paragraph (A) of the Saudi income tax law. (c) If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period. by shafprince March 1, 2017, 6:30 pm 1.1k Views. The Department may continue with the procedures of seizure after the passage of twenty days from the taxpayer's receipt of the Department's noticeof its intention of seizure. A taxpayer shall calculate the book value or the stock by use of the weighted average method. Twenty-five percent (25%) of the unpaid tax if the delay exceeds three hundred and sixty-five (365) days of the date specified by Law. Article 12: Expenses related to earning income. (a) The tax rate of the tax base is twenty (20) percent for each of the following: (b) The tax rate of the tax base for a taxpayer engaged only in natural gas investment activities is thirty (30) percent. (a) A taxpayer who uses the accrual method shall record income and expenses when they are due. Withholding Tax in Saudi Arabia . The partner is treated as having disposed of part of all of his share in the partnership, if the estimated distribution exceeds the partner's cost base in the partnership. providing the beneficiary with a certificate stating the value of the amount paid to him and the value of the tax withheld. Salary & Wages in Saudi Arabia and its Deducution Rule. Under current practice, supply contracts whereby a foreign, non-resident company exports goods to Saudi Arabia would not generate income subject to Saudi tax. Expenses for purchase of land or equipment used for research may not be deducted. Dividends, management or directors' fees paid by a resident company. 4. (h) If the balance of the value of the group at the end of the year, after allowing for the deduction in accordance with paragraph (d), is less than one thousand riyals (SR1,000), the amount of the balance may be deducted. filing a declaration on the basis of unavailability of books or records, and including therein information that contradicts what is shown in the taxpayer's books and records. Saudi Arabia Collects New Tax On Expats From July, Saudi Arabia is collecting a new tax from expats and their dependants, a move that is seen to boost the country’s revenues amid weak oil prices. (e) The balance of the value of each group at the end of the taxable year is the total of the balance of the value of the group at the end of the previous taxable year after the depreciation deduction in accordance with this Article for the previous taxable year, and fifty percent (50%) of the cost base of assets in use added to the group in the current and previous taxable years, after the deduction of fifty percent (50%) of the compensation received from the assets disposed of during the current and previous taxable years, provided that the balance does not become in the negative. If the income is attributable to a permanent establishment of a non-resident located in the Kingdom, including income from sales in the Kingdom of goods of the same or similar kind as those sold through such a permanent establishment, and income from rendering services or carrying out another activity in the Kingdom of the same or similar nature as an activity performed through such a permanent establishment. a resident capital company with respect to shares of non-Saudi partners. 153/M dated 5/11/1441AH corresponding to June 26, 2020 has been issued approving the ministers’ Council Resolution No. (b) The payment of tax in installments in accordance with this Article shall not exempt the taxpayer from payment of the delay fine for the period of installments pursuant to paragraph (a) of Article 77 of this Law. (a) The gain or loss from the disposal of an asset is the difference between the compensation received and its cost base. (b) If calculation of income involves an amount in a currency other than the Saudi Riyal, the amount shall be calculated for taxation purposes in Saudi Riyal at the exchange rate declared by the Saudi Arabian Monetary Agency on the date of the transaction. (a) For the purpose of tax determination, the Department may: (b) The Department may make assessment due on the taxpayer using the estimated tax method according to facts and circumstances pertaining to the taxpayer if the taxpayer fails to file its declaration on time or keep precise accounts and records, or to comply with the form, pattern and method required in its books and records. (b) The amount of expenses deductible in accordance with paragraph (a) of this Article for each year shall not exceed four percent (4%) of the balance of the value of the group at the end of that year. A 20% tax rate applies to foreign companies, which are paid by the non-Saudi owner or liable shareholders. Depending on the type of business, tax rates may differ across sectors. by the law. ... Social insurance or any other contributions due on the employees as provided for by law. (e) Tools used by the taxpayer for its trade, and personal effects and furnishings, are exempt from seizure, with a maximum limit not exceeding three hundred thousand riyals (SR300,000). (f) fines and financial penalties paid or payable to any party in the Kingdom, excluding those paid for breach of contractual conditions and obligations. The Dispute Resolution Committee (DRC) hears tax disputes between GAZT and tax-payers. The tax base for a nonresident ca rrying out activities in Saudi Arabia through a PE is the income arising from the activities of the PE, less allowable expenses. (b) In case of failure to file the declaration within the prescribed time, the following fine shall be imposed in lieu of the fine stipulated under paragraph (a) of this Article, if the fine under paragraph (a) is less than the amount specified under this paragraph: (c) Unpaid tax shall mean the difference between the amount of tax due under this Law and the amount paid on the date specified by Law under paragraph (b) of Article 60 of this Law. In case of acquiring an asset in a taxable year prior to the effectiveness of this Law, the value to be added to the appropriate group shall be the cost of the asset minus any depreciation deduction previously granted to the taxpayer. a non-Saudi resident natural person who conducts business, a non-resident person who conducts business in the Kingdom through a permanent establishment, Movable industrial and agricultural buildings: ten percent (10%), Factories, machines, engines, hardware and software (computer software) and equipment, including passenger cars, and cargo vehicles: twenty-five percent (25%), Expenses for geological surveying, drilling, exploration, and other preliminary work to exploit natural resources and develop their fields: twenty percent (20%), All other tangible and intangible depreciable assets not included in pervious categories, such as furniture, planes, ships, trains and goodwill: ten percent (10%). No income is taxed by Saudi Arabia, so the source of income does not matter. (c) Adding back all financing fees and other bank service fees. (d) Withholding tax rates are those specified under Article 68 of this Law. Without prejudice to the Certified Accountants Law, the Department may prosecute any certified accountant proven to have presented or certified false statements, which constitutes a violation of established accounting principles with the intention of assisting the taxpayer to evade all or part of the tax. (a) No gain or loss shall be calculated for a transfer of a partner's asset to a partnership against acquiring a share in such partnership. A taxpayer is subject to income tax stipulated under paragraph (b) of Article 7 of this Law on the following: (a) Its income from processing and fractionation of natural gas in a licensed independent plant. (a) Natural gas investment activities shall mean the exploration, production, collection, treatment, processing, fractionation of natural gas liquids, production and collection of gas condensates, as well as transportation of natural gas, its liquids and gas condensates. (c) The Regulations shall specify the powers, jurisdictions and work procedures for Preliminary Objection Committees and Appeal Committees and their members academic and professional experience and remuneration. The tax base from branches of foreign airlines operating in the Kingdom shall be considered five percent (5%) of the gross income realized in the Kingdom from tickets, cargo, mail or any other income. A) Income tax law amendment. Under current practice, supply contracts whereby a foreign, non-resident company exports goods to Saudi Arabia would not generate income subject to Saudi tax. The Regulations shall determine the rules and restrictions specifying such allocations. (a) Every taxpayer required to file a declaration shall file it in the prescribed form, include its identification number, and pay the tax due thereon to the Department. Corporate tax in Saudi Arabia. Article 64: Related Persons and Persons under Common Control. You can access the Implementing Regulations of Income Tax law by visiting the following link:, Implementing Regulations of Income Tax law, Individuals’ Registration (Economic Activities), Individuals’ Registration (Selling Properties). Labour laws in Saudi Arabia: Saudi Arabia’s labour laws have been reformed by the country’s Ministry of Human Resource and Social ... No Income Tax on … Saudi corporate tax rates range from 25 percent (on annual taxable income of up to SR 100,000) to 45 percent (on annual taxable income of over SR 1 million). Five percent (5%) of the unpaid tax if the delay does not exceed thirty (30) days specified by Law. The applicable income tax rate is 20%, with the exception of tax rates for the gas and oil industries. (b) From the sales returns, the expenses of the seizure and sale shall be paid first, then tax and fines. If he is a partner in a capital company and he, either alone or together with a related person or persons under this Article, controls fifty percent (50%) or more of the voting rights or its value, either directly or indirectly through a subsidiary company or companies of any type. 5123 has been issued to reflect the same amendment from a Zakat perspective. 687 dated 2/11/1441AH corresponding to June 23, 2020 which provides an approval of the amendment to Article (2) paragraph (A) of the Saudi income tax law. Article 67: Formation/Jurisdiction of Preliminary Objection and Appeal Committees. The Regulations shall specify restrictions and procedures required to implement this obligation. Amounts paid by a resident for services performed in whole or in part in the Kingdom. The rates may vary between 5%, 15%, and 20% based on the type of service … Saudi Arabian interests and citizens of GCC countries pay zakat, which is a religious wealth tax based on the taxpayer’s net worth, not income. Non-employment income is taxed as an entity or permanent establishment (PE). (d) A taxpayer may not deduct a loss resulting from the transfer of properties between it and party related thereto. (b) Its income from transporting natural gas for a third party through a licensed independent pipeline. (a) A taxpayer not complying with the provisions of paragraphs (a), (b), (d) and (f) of Article 60 of this Law shall be subject to a fine of one percent (1%) of its gross income provided that the fine does not exceed twenty thousand Saudi riyals (SR20,000). (c) The monthly maintenance due upon the taxpayer as well as its living expenses stipulated by provisions of other laws in force are not subject to freezing. Income from natural gas investment activities shall be the gross income derived from the sale, exchange or transfer of natural gas and its liquids, gas condensates, including sulfur and other products, as well as any other incidental or non-operational income derived from the taxpayer's primary activity, regardless of its type or source, including income derived from the utilization of excess energy in a facility subject to natural gas investment tax. (b) The market value of non-cash property transferred to an employee or any other service provider is determined without regard to any restriction on transfer of ownership. (e) income tax paid in the Kingdom or in another sountry. Any remaining amount shall be returned to the taxpayer. (b) Any person, including banks and financial institutions, holding in possession a seized asset, shall deliver the asset to the Department upon its request. (c) The cost of goods sold during a taxable year is determined by adding the cost of goods purchased during the year to the opening stock and subtracting the value of the closing stock. Article 1: Definitions (c) If a partner retires from membership in a partnership and receives a distribution causing him to incur a loss by disposing of his share in the partnership, the cost base of the partnership's losing assets shall be adjusted by reducing the value of the loss incurred, provided that the cost base of such assets is not less than zero. For the purposes of this Law, investment funds shall be considered capital companies, Partnership: A general partnership, a silent partnership, or a limited partnership, Resident: A natural person, a company that satisfies the residency conditions of Article Three of this Law, any governmental department or ministry, or public entity, or any other corporate person or entity formed in the Kingdom, Non-resident: Any person who does not satisfy the requirements of the status of a resident, Saudi citizen: A person holding Saudi nationality or who is treated as such, Commercial books: Set of commercial books kept by the taxpayer in which all commercial transactions are recorded, as described in Royal Decree No. Wherever they appear in this Law, each of the following words or terms will carry the meaning beside it unless the context indicates otherwise. In determining the tax base of each taxpayer, a deduction is allowed for donations paid during the taxable year to public agencies or philanthropic societies licensed in the Kingdom which are nonprofit organizations and are allowed to receive these donations. (b) A taxpayer shall not be obligated to make advance payments under paragraph (a) of this Article if the result of the above equation is less than five hundred thousand Saudi riyals (SR500,000). (i) If the asset disposed of is encumbered by debt exceeding its market value, the taxpayer disposing of the asset is treated as having received compensation equal to the value of such debt. (f) A partnership shall file an information declaration in accordance with Article 36 of this Law, on or prior to the sixtieth day following the end of its taxable year. 1110 dated 24/12/1410 [16 July 1990], or any subsequent amendments, Regulations: Implementing regulations of this Law. The carried-forward loss shall be deducted from the tax base of the following taxable years until the cumulative loss is fully offset. (c) A fine not less than one thousand riyals (SR 1,000) and not exceeding ten thousand riyals (SR 10,000) shall be imposed for failure to register. Saudi Arabia: Income Tax Law Date of adoption 6 March 2004 Entry into force In effect Text versions Arabic Source: – Kingdom of Saudi Arabia Bureau of Experts at The Council of Ministers, accessed: 21 May 2013. (a) A partnership's transfer of a non-cash asset to a partner therein, including liquidation of the partner's share, is treated as a disposal of the asset by the partnership, with declaration of gain or loss on the transfer date. Operational losses incurred before the entry into force of the Council of Ministers' resolution number 3, dated 5/01/1421 H. may not be carried forward. (a) The Minister has the power to allow payment in installments for amounts due on a taxpayer whenever enough reasons and justifications exist within the framework of restrictions and conditions specified in the Regulations. 2. (b) any amounts paid or benefits offered to a shareholder, a partner or any of their relatives, which constitute salaries, wages, awards or the like, or which do not satisfy the conditions for transactions among independent parties against properties or services.
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