Accounting and tax
- Saudi companies are taxed at a flat company tax rate of 20% on domestic income only. In contrast, individuals are tax exempt;
- Annual audited financial statements and corporate tax return are submitted to the Department of Zakat and Income Tax within 4 months of account year end. All tax declarations and correspondence with the DZIT must be in the Arabic language;
- Resident companies and individuals settle their tax liabilities either by monthly payments, third party withholdings, or a combination of both;
- Saudi customers are required to withhold tax at a rate of 15% from payments to foreign companies. The payer is required to i) pay the tax withheld to the Department of Zakat and Income Tax within 10 days after the end of the month ii) to issue a certificate to the payee stating the amount of payment and the tax withheld;
- Dividend distributions by Saudi companies to foreign shareholders suffer withholding tax of 5%;
- Head office expenses are disallowed as a tax deduction if they are indirect general and administration costs, royalties, commissions, and financial costs charged by a head office located abroad to wholly owned subsidiaries in Saudi Arabia.
- Customs duties are still imposed on importation of many goods. Most items are subject to a 12% tariff. However, imported goods that are identical or similar to those produced locally are charged a duty of up to 20% in order to protect local industries;
- All goods imported into the Kingdom require customs clearance, which may only be obtained upon payment of the applicable customs duty. If an importer fails to settle the duty, the customs authorities are empowered to sell the goods to recover the due amount;
- Goods exported to other GCC states are not subject to customs duties if the company has a GCC national participation of at least 51%.
- Industrial companies can benefit from Saudi Arabia Industrial Development Fund interest-free loans. A loan of 50% of the total cost of the project is granted to companies with Saudi shareholders owning more than 50% of the total shares; companies with smaller Saudi participation will be granted reduced loans proportionally;
- Companies can rent industrial spaces at a lower rate, and pay reduced rate for water and electricity.
Legal and compliance
Healy Consultants Compliance Department guides our Client through legal and tax obligations.
- The minimum amount of paid up capital to be invested in a foreign-owned company is US$26,665. A Saudi Arabia business setup of an LLC must have at least two shareholders and one director;
- The company directors are appointed, replaced, and dismissed by the shareholders. The identities of shareholders and directors are on the public register;
- A Saudi Arabia company formation of an LLC is required to transfer 10% of net profits each year to a legal reserve until such reserve reaches a level of 50% of the paid-up share capital;
- Every company must lodge an annual return in which a director or secretary of the company confirms relevant details of the company for the public register including names and addresses of all directors, address of principal place of business, and details of shareholders and their shareholdings;
- All business activities conducted in Saudi Arabia receive government approvals and permits and licenses. There is an obligation to register particular products with the government, including food, medical equipment, cosmetics, and medicine;
- The paramount body of law in the Kingdom of Saudi Arabia is the Shari’ah. Other sources of Saudi Arabian law are derived from enacted legislation including Royal Orders, Royal Decrees, Council of Ministers Resolutions. The Shari’ah courts have jurisdiction over all civil claims, all family law, real property matters, and the majority of criminal matters;
- In 2004, the Kingdom of Saudi Arabia acceded to the Paris Convention for Protection of Industrial Property including trademarks, patents, and copyright;
- Social insurance in the Kingdom is administered by the General Organization for Social Insurance. Employers are required to make contribution at the rate of 9% of salary (including benefits in kind) for Saudi employees who are required to contribute same percentage of their salary in respect of social insurance. In addition, employers are required to contribute 2% of the basic salary of both Saudi and non-Saudi employees to cover the job hazards risk;
- The Saudi Trade Names Law protects registered trade names in the Kingdom of Saudi Arabia by requiring every business operating in the Kingdom to register its trade name with the Commercial Register at the Ministry of Commerce and Industry and proscribing any other business or individual from using registered trade names. Only Arabic or “Arabized” trade names may be registered, except for companies with foreign shareholders whose names are registered outside of the Kingdom of Saudi Arabia;
- The process of deregistering a company is dictated by the Government. This process will take a minimum of 6 months. Healy Consultants fee to project manage company de-registration is US$1,450. During this 6 months period it is mandatory to maintain a resident company secretary and a legal registered office.