Corporate organizations must pay Corporate tax in Saudi Arabia to operate and grow within the country. It is a mandatory law and an essential part of the financial structure and mandate of a company in Saudi Arabia. Whether you have a local business or international, small organization or corporate company, you must oblige and comply with the law of the country.
We share all the relevant information in this guide for the corporate tax on companies operating in Saudi Arabia. You can go through this article, which will help you navigate the corporate tax system efficiently.
Corporate Taxation in Saudi Arabia Explained
Saudi corporate tax is implied on the net revenue of corporations. All the resident or non-resident corporate companies in Saudi Arabia must comply with the laws and regulations for corporate taxation in the country. The Saudi government general authority of Taxation is liable for managing, administrating, and implying corporate taxation in the country.
These are a few essential points to know about corporate taxation;
The corporate tax is implied on the net revenue, all profits, capital gains, and other income generated by the country’s corporate business.
All commercial, industrial, and professional activities and services must comply with taxation rules from the government.
The corporate taxation rules and regulations can be changed and updated after a certain period. The corporate sector must stay connected with the authorities to receive updates to prevent any fines and penalties. They can hire a lawyer or advocate to handle the company’s taxation and updates according to the country’s laws of taxation.
Which companies are liable to Pay Corporate Tax in Saudi Arabia?
Corporate taxation is applicable to various types of companies with different levels. We share a breakdown of the relevant information below:
The Capital Corporate Resident Companies in Saudi Arabia
This type of company has been established and grown in Saudi Arabia. These companies are liable to pay the corporate tax as per the laws and regulations of the Saudi government. This taxation is implied on all their local or international net revenues acquired by the business. These types of companies can be small or large organizations and can pay the tax according to the terms and conditions complied by the authorities in the country.
However, it crucial to calculate the tax amount according to the net revenues by the tax regulations and the company must hire relevant advocates to file taxation.
The corporate tax rate may update periodically, and the company must update for the relevant changes. The tax rates are implied according to the type, size, and legal status of the business.
Resident Shares Corporate Companies in Saudi Arabia
Resident Shares companies divide their equity into shares. All the local and international revenue generated from this business is liable to pay the corporate tax in Saudi Arabia according to the law.
These companies are divided into various sectors, like manufacturing, retail, and services. The tax calculation is crucial for this type of company, which has multiple shareholders who share the equity. These companies are also liable to pay value-added taxes and withholding taxes on their income. These companies must have legal tax advisors and advocates to handle the taxation.
Oil and Hydrocarbon Production Company
Oil and Hydrocarbon production companies provide rich natural resources to the country and have a great impact on economy. These are a few points that need to be considered for taxation for this type of company.
This type of corporate companies generates highest profits from the natural resources and they are liable to eighty-five per cent more tax than other corporate companies.
The tax calculations for these companies depend on the costs of assets, oil and gas natural reserves, exploration, development, and depreciation costs.
These companies also must hire tax advisors and advocates to handle the taxation process.
They are also liable to pay value-added taxes and withhold taxes from the Saudi government.
Non-Saudi Corporate Companies
Non-Saudi corporate companies that connect with Saudi sources for business to earn revenue are also liable to pay corporate taxes according to the law of the country. They are not permanently established in the country but indulge in business and earn income from the business sources in the country.
The tax rate applies to income generated from Saudi sources, whether industrial, commercial, or professional services, products, or activities.
These companies also hire tax lawyers to manage the country’s taxation.
The tax rate depends on the type of business, legal and financial status, and revenues according to the taxation law in the country.
A person having investment in natural gas fields
Any individual investing in natural gas sources in Saudi Arabia may be liable for corporate taxation within a specific category. The tax rates depend on the extraction and exploration activities of the natural gas sources, their costs, and their current market values. The tax rates calculation may vary depending on the income, gas reserves, their values, and depreciation costs.
Corporate Tax Rates in Saudi Arabia
The corporate tax rates imply various factors based on income, profits, types of businesses, and activities. The tax rates are higher for the highest-earning businesses, such as oil and hydrocarbon companies. They earn the maximum and are liable to pay the highest tax rates in the country.
The other taxes also comply with corporate taxes, like Zakat, which are based on the net worth annually.
These companies must consider the taxation laws for the company’s financial structure and hire experts for tax management services.
Conclusion
The corporate tax in Saudi Arabia applies to a wide range of entities, from resident capital and shares companies to oil and hydrocarbon production companies, non-Saudi businesses, and investors in natural gas fields. Corporate tax rate depends on the size and type of business, profits, and its revenue.
If you are interested in seeking professional tax advice, please contact us.
