Corporate Tax in Saudi Arabia: A Complete Guide for Foreign Businesses: Stay Compliant, Maximise Value

Understanding Corporate Tax in Saudi Arabia: What Foreign Businesses Need to Know

Saudi Arabia is an increasingly attractive market for foreign investors, but navigating its corporate tax landscape requires clarity and precision. This guide breaks down corporate tax, Zakat, and withholding tax obligations so your business remains compliant, cost-efficient, and strategically aligned.

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What is the Corporate Tax Rate in Saudi Arabia?

Foreign companies operating in Saudi Arabia are subject to a standard corporate income tax (CIT) rate of 20% on their net adjusted profits. This applies to all foreign-owned entities and the foreign ownership portion of joint ventures. Exceptions exist for businesses in the hydrocarbons sector, where rates can climb as high as 50% to 85%, depending on capital investment and revenue.

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Tip: If you're planning to operate in the oil, gas or extractive industries, engage with expert advisors early to evaluate potential tax liabilities and structuring options.

Zakat vs. Corporate Tax: Understanding the Dual System

Saudi Arabia maintains a dual taxation system:

• Corporate Tax (20%): Applied to non-Saudi shareholders.
• Zakat (2.5%): Applied to Saudi and GCC national shareholders on the company’s Zakat base (net worth).

This means that mixed-ownership companies must calculate both taxes and allocate them accordingly.

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Zakat is not profit-based. It's assessed on assets like cash, receivables, inventory and less liabilities.

Withholding Tax (WHT) in Saudi Arabia: What You Should Know

Saudi Arabia levies WHT on payments made to non-residents. Here's a quick breakdown:

Type of Payment

• Dividends, Rent, Interest, Insurance: 5%
• Royalties, Technical/Consulting Fees: 15%
• Management Fees: 20%

WHT must be remitted within 10 days of the month following the payment.

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Example: Paying a consulting firm abroad? Budget an additional 15% WHT unless exempt under a tax treaty.

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Registering for Tax in Saudi Arabia: Step-by-Step

1. Obtain Commercial Registration (CR).
2. Create an account on ZATCA's online portal (Zakat, Tax and Customs Authority).
3. Submit required documents, including:
   • Articles of Association
   • Shareholder details
   • Financial statements
4. Register within 30 days of becoming liable for tax.

Peninsula ensures full registration support, guiding clients through every step with weekly updates.

Tax Filing & Compliance Requirements

• Annual returns must be filed within 120 days of the financial year end.
• Audited financial statements are mandatory.
• If annual tax liability exceeds SAR 500,000, quarterly advance payments are required (25% of prior year).

Non-compliance can result in financial penalties and reputational risk.

Thinking of expanding to Saudi Arabia?

Peninsula provides full tax registration, structuring, and compliance support for foreign companies entering the Kingdom. Book your free consultation to discuss your business tax strategy with our experts.

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About Alistair:

‍Alistair Paine brings 15 years of dedicated experience in Saudi market entry, guiding Fortune 500 companies and innovative scale-ups through successful establishment in the Kingdom. His expertise in Saudi company formation, licensing and market entry strategy, positions him as a leading authority and consultant in international business expansion to Saudi Arabia.

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Schedule a free consultation with Alistair and the Peninsula team to understand which market entry strategy is best suited to your business setup in Saudi Arabia.

Email: Alistair@peninsulacs.com

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