Understanding Taxes in Saudi Arabia
A Comprehensive Guide
Navigating the Saudi Arabian tax system is essential for businesses and individuals operating in the Kingdom. From corporate obligations to indirect taxes, understanding the structure, scope, and filing requirements ensures compliance and strategic financial planning. Below is a simplified overview of the main taxes applicable in Saudi Arabia, with a brief explanation of each.
1. Direct Taxes
These are taxes imposed on income or profits, primarily affecting non-Saudi or foreign-owned businesses:
Zakat
Describe the item and include any relevant A religious wealth tax applied to Saudi and GCC-owned entities at 2.5% of the Zakat base. It’s assessed and collected by ZATCA, and calculated using the adjusted balance sheet method.. Click to edit the text.
Corporate Income Tax
Applied at 20% on the net profits of foreign-owned businesses or foreign shares in mixed-ownership entities. Local (Saudi/GCC) ownership is subject to Zakat instead.
Withholding Tax (WHT)
Deducted at source on payments made to non-residents (e.g., royalties, dividends, technical services), with rates ranging from 5% to 20% depending on the payment type and treaty status.
2. Indirect Taxes
These are consumption-based taxes applied on goods, services, or transactions:
Value Added Tax (VAT)
A 15% indirect tax on most goods and services. Businesses with annual revenues above SAR 375,000 must register. VAT returns are filed monthly or quarterly, depending on revenue.
Customs Duties
Applied to imports at varying rates (typically 5%–25%) depending on the product classification.
Excise Tax
Levied on harmful products such as tobacco (100%), energy drinks (100%), and soft drinks (50%) to reduce consumption and promote health.
Real Estate Transaction Tax (RETT)
A 5% tax on real estate sales, swaps, and transfers. It replaced the previous VAT on real estate transactions for qualifying deals.
E-Invoicing (Fatoorah)
Not a tax itself, but a mandatory digital invoicing system for VAT compliance. Enforced by ZATCA in two phases: generation and integration.
3. Statutory Fees & Government Contributions
These are mandatory payments and fees businesses must comply with to operate legally and support social welfare programs:
GOSI (Social Insurance)
Employers must contribute to the General Organization for Social Insurance. Contributions are based on employee nationality: 22% total for Saudi employees (9% from employer for pension, 9% from employee, 2% for occupational risk, etc.).
Chamber of Commerce Fees
Annual fees required for business registration with the Chamber of Commerce, based on company size and sector.
Qiwa & Ministry of HR Fees
Qiwa is a platform for employment services. Government work permit fees include SAR 800/month per expat and a SAR 100/month dependent fee.
Mudad & WPS Compliance
Mudad platform enforces Wage Protection System (WPS) to ensure timely employee salary payments. Employers must be compliant to avoid fines.
Municipal Fees (Baladiyah)
Fees paid to local municipalities for commercial licenses, waste services, and commercial signage. Vary based on location and activity.
Iqama Renewal & Exit/Re-Entry Fees
Paid to renew residency permits (Iqama) and manage employee travel. Fees vary by employee status and visa type.