Tax Compliance in Saudi Arabia

The standard Corporate Tax rate in Saudi Arabia is generally 20% on the foreign ownership share of a company's net adjusted taxable profits. The taxable amount is determined after considering the applicable tax rules, allowable deductions, and adjustments. Higher tax rates may apply to businesses engaged in oil and hydrocarbon production activities under specific Saudi tax regulations.

Zakat is a religious levy generally calculated at 2.5% of the applicable Zakat base and primarily applies to the Saudi and GCC ownership share of a business. Corporate Tax is generally charged at 20% on the tax base attributable to the non-Saudi ownership share. Therefore, in a mixed-ownership company, Zakat and Corporate Tax may both apply based on the respective ownership percentages.

The standard VAT rate in Saudi Arabia is 15% and applies to most taxable supplies of goods and services within the Kingdom. Certain transactions, such as qualifying exports, may be zero-rated, meaning VAT is charged at 0%. Other supplies, including certain financial services, may be exempt from VAT depending on the applicable Saudi Arabia Tax Regulations.

VAT registration is mandatory when a business's annual taxable supplies reach or exceed SAR 375,000. Businesses with annual taxable supplies of at least SAR 187,500 may voluntarily register if they meet the applicable requirements. Once registered, a business must charge VAT where applicable, file VAT returns, maintain proper records, and meet other VAT Compliance in Saudi Arabia obligations.

Businesses with annual taxable supplies exceeding SAR 40 million generally file VAT returns monthly, while other eligible businesses generally file quarterly. VAT returns include details of taxable sales, output VAT, eligible business expenses, and recoverable input VAT. Returns and any applicable VAT payment are generally due by the last day of the month following the relevant tax period.

Withholding Tax in Saudi Arabia applies to certain payments made from Saudi sources to non-resident individuals or businesses that do not have a taxable presence in the Kingdom. The Saudi payer is generally responsible for deducting the applicable tax from the payment and remitting it to ZATCA. WHT rates generally range from 5% to 20%, depending on the type of payment, such as dividends, royalties, or management fees.

ZATCA E-Invoicing, also known as Fatoora, is Saudi Arabia's mandatory electronic invoicing system designed to improve tax transparency, reduce tax evasion, and strengthen compliance. Phase 1, relating to the generation and storage of electronic invoices, began in December 2021. Phase 2 requires eligible businesses to integrate their e-invoicing systems with ZATCA and has been rolled out in waves since January 2023.

Corporate Tax and Zakat returns must generally be filed within 120 days after the end of the taxpayer's financial year. For example, a company with a financial year ending on 31 December would generally have a filing deadline of 30 April in the following year. Businesses should also ensure that any applicable tax or Zakat liability is calculated and paid within the prescribed deadline.

If a taxpayer's previous year's tax liability exceeded SAR 500,000, advance Corporate Tax payments may be required during the current tax year. Three advance installments, generally representing 25% each of the required advance tax amount, are due at the end of the sixth, ninth, and twelfth months of the tax year. These payments help spread the taxpayer's tax liability throughout the year.

Yes, Saudi Arabia has an extensive network of Double Taxation Agreements (DTAs) with various countries. These treaties are intended to prevent the same income from being taxed in both Saudi Arabia and another country. They may also reduce applicable Withholding Tax rates on certain cross-border payments, provided the taxpayer meets the relevant eligibility conditions and documentation requirements.

A Permanent Establishment (PE) is a taxable presence that a foreign company may create in Saudi Arabia through its business activities. A PE may arise through a branch, fixed place of business, construction activities, or certain activities carried out by a dependent agent. Creating a PE can result in Saudi Corporate Tax and other tax obligations, even if the foreign company has not established a separate legal entity in the Kingdom.

Real Estate Transaction Tax (RETT) is generally a 5% tax imposed on qualifying real estate disposals and transfers in Saudi Arabia. It replaced VAT on most real estate transactions from October 2020. The tax treatment of a transaction may depend on the type of property, transaction structure, and whether any exemptions apply under the relevant regulations.

Businesses that fail to meet their Tax Compliance in Saudi Arabia obligations may face applicable late-filing, late-payment, or other penalties depending on the tax and violation and late-payment penalties for VAT, Withholding Tax, Corporate Tax, and Zakat. Fixed penalties may also apply for failure to register, maintain required records, or comply with ZATCA E-Invoicing requirements. The exact penalty depends on the type and seriousness of the violation.

Enterslice provides end-to-end assistance with Tax Compliance in Saudi Arabia, helping businesses understand and manage their obligations under ZATCA regulations. Our support covers tax registration, VAT Compliance in Saudi Arabia, Corporate Tax, Zakat, Withholding Tax, ZATCA E-Invoicing, transfer pricing, record maintenance, tax filings, and compliance deadlines. By managing these requirements accurately and on time, Enterslice helps businesses reduce compliance risks and avoid potential penalties.