Saudia Arabia Tax & Business Guide - Deloitte

Basic facts
Population 25.3m Inflation 2.3% (2006)*
Main languages Arabic GDP per head US$13,752*
Currency Saudi riyal (SAR) GDP growth 4.2% (2006)*
Economic communities WTO, Gulf Co-operation Council (GCC)
GDP sources 3.1% agriculture, 63.6% industry, 33.3% services
*Economist Intelligence Unit estimates.
Political environment

Saudi Arabia is a kingdom. The crown prince, Abdullah bin Abdel-Aziz al-Saud, assumed the throne following the death of King Fahd in August 2005. The king holds legislative and executive power. He appoints the Council of Ministers, which he also leads as prime minister.
Foreign trade and investment
Exports US$207.8bn (2006)* Imports US$64.2bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: The US, Japan, Korea and China.

Major exports: Crude oil and oil products.

Saudi Arabia is the regionÌs largest oil exporter. Non-oil exports have also begun to grow as the country attempts to diversify its economy.

The policy on foreign investment restricts the number of industries that foreign firms may enter. However, some foreign oil companies have recently signed agreements with the Saudi government, and the new insurance law allows foreign insurance companies to be incorporated in Saudi Arabia.
Business and financing
Business forms Limited liability companies

The government has made the joint stock form available when it foresees possible public-equity participation. Although legislation allows foreign companies to register branches, relatively few branch licences have been issued.

The main banking centre is the capital, Riyadh.
Labour environment
Unemployment rate N/a Minimum wage None

A unified system for salaries and wages determined on the basis of experience and qualifications is applied in the government sector, whereas private-sector salaries are market-based.

Industrial injury and illness benefits and pensions are funded by contributions to the General Organisation for Social Insurance. The employerÌs contribution is 11% for Saudi workers to cover occupational hazards (2%) and pensions (9%); the Saudi workerÌs contribution is 9%. The employerÌs contribution to cover occupational hazards for foreign workers is 2%.
Taxation
Corporate tax
Flat rate 20%

Companies are subject to tax on Saudi-source income, which is defined broadly to include the income of an entity doing business in the Kingdom, whether or not the entity has a permanent establishment. Tax is charged at a flat rate of 20%. Businesses in the natural-gas sector are subject to a 30% rate, and businesses in the oil sector are taxed at 85%. Foreign companies may obtain tax exemptions and relief for approved projects. Further incentives for foreign investment are under consideration.
Individual tax
Flat rate 20%

Individuals pay tax at a flat rate of 20% on income sourced in Saudi Arabia. Saudi citizens and citizens of member states of the Gulf Co-operation Council (GCC) do not pay income tax but are subject to Zakat, a religious tax based on 2.5% of equity less fixed assets. Foreign citizens are subject to income tax on their Saudi-source income. There is no tax on wages and salaries apart from the deduction for social security for Saudi workers (see Labour environment above).
Capital gains
Taxed as income

Capital gains of companies and individuals are generally taxed as income.
Indirect tax
No sales tax or VAT

There is no sales tax or value-added tax (VAT).
Tax administration and compliance
Tax year Companies: accounting year; Individuals: calendar year

Companies must file a tax return within 120 days of the year-end. Tax payments in advance should be made in three instalments, on the 6th, 9th and 12th month of the tax year, and the balance paid with the tax return. The advance payments for each instalment are calculated at 25% of the preceding yearÌs income tax. No advance payments are required if the preceding yearÌs income tax is less than SAR 2m.
Additional tax information
Withholding taxes Range from 5% to 20% on the amount paid, depending on the type of service rendered by non-resident parties. Interest paid to non-resident parties is subject to withholding tax at 5%.
Tax treaties Saudi Arabia has only one comprehensive tax treaty (with France). Treaties with China, India, Iran and Malaysia have been signed.
Dividends Dividends paid to non-resident shareholders are taxed at 5%.
Revenue protection There is no transfer-pricing or thin-capitalisation legislation.
Groups There is no group tax treatment.
Incentives Tax exemptions for approved projects and for increased investment.
Other taxes Zakat, Travel taxes, Road tax.