Saudi Arabia accounting and tax considerations in 2024

Since 2003, Healy Consultants, part of Hawksford assists multi-national Clients’ to timely accurately and completely discharge their annual legal & accounting and tax statutory reporting obligations. This web page will help your Firm understand the Saudi Arabian tax system and reporting obligations.

• Summary of taxation

  1. Corporation tax is 20%. KSA adopts a worldwide principal of taxation, whereby all income of KSA tax resident entities generated within or outside of KSA should be subject to taxation in Saudi Arabian.
  2. Capital gains tax is 20%. For example, an overseas shareholder selling shares in a private KSA resident company will suffer 20% on the capital gain. Assets transferred between Group companies are exempt from this tax.
  3. Saudi Arabia’s VAT tax rate is 15%. Taxpayers must submit the VAT return electronically by the end of the following month, together with the required payment.
  4. Overseas remittance payments trigger Saudi Arabian withholding tax of between 5% and 20% based on i) type of service and ii) whether the beneficiary is a related party and iii) the existence of a double tax treaty. For example, dividends withholding tax is 5%. Management fees withholding tax is 20%. Payments made to non-resident related parties (or head office) for Technical and Consulting services and International Telecommunication services only suffer 5% withholding tax.
  5. Presently, there is no employment tax in Saudi Arabia. However, employers are required to pay monthly social security and pension contributions. Employer contributions amount to 12% for Saudi employees and 2% for foreign employees.
  6. Saudi Arabia has over 50 Double Taxation Agreements (DTAAs) including UAE, Singapore, Hong Kong, China, Russia, India, Ireland, UK or South Africa. See the full list together with the details of each agreement here.
  7. If a Saudi Arabian company is a joint venture between a Saudi/GCC shareholder and a foreign shareholder, the portion of taxable income attributable to the foreign shareholder will suffer 20% corporation tax and 5% withholding tax applicable on the distribution of dividends to the non-resident shareholders. The Saudi shareholder’s share of annual net profits is subject to Zakat.
  8. Most imported goods are subject to Customs duty at a rate between 0% to 25%. Many businesses and facilities continue to apply for the industrial exemption program, which allows the duty-free import of goods when the importer has an industrial exemption in place.

• Summary of filings

  Here, our team have summarised the most common filings applicable to most of companies in Saudi Arabia. From this table you should be able to better understand compliance requirements.

  Filing	Gov agency	Description	Deadline
  Corporate Income Tax	Zakat, Tax and Customs Authority	All KSA tax resident companies are subject to 20% corporation tax. Audited financial statements must be filed together with the corporate tax return.	Annual filing within 4 months of the year-end
  Audit of Financial Statements	Ministry of Commerce (Qawaem)	Audit is mandatory for all foreign companies regardless whether the company is active or dormant. For a KSA company, an audit exemption may be applicable. All financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS) and in Arabic.	Annual filing within 6 months of the year-end
  Transfer Pricing Declarations	Zakat, Tax and Customs Authority	All KSA tax resident companies are subject to transfer pricing provisions and required to prepare prepare the master file, local file and country-by-country report.	Annual filing within 4 months of the year-end
  VAT Returns	Zakat, Tax and Customs Authority	All KSA tax resident companies are required to file a VAT return regardless whether the company is active or dormant. Companies with annual turnover of more than SAR 40 million are required to file VAT returns on a monthly basis.	Quarterly filing before the end of the following month (annual turnover is less than SAR 40 million).
  Withholding Tax Return	Zakat, Tax and Customs Authority	All KSA tax resident companies with foreign transactions must levy withholding tax on the amounts paid to the non-resident according to the applicable rates.	Monthly filing within 10 days of the month-end
  E-invoicing (FATOORA) system	Zakat, Tax and Customs Authority	All tax resident entities are required to generate, store and issue electronic tax invoices using compliant e-invoicing systems.	Continuous

• Compliance considerations

  1. Within 4 months of the year-end, a corporation tax return must be filed with the Department of Zakat and Income Tax (DZIT) and tax must be paid. The corporation tax system is one of self-assessment. Advance corporation tax payments are required to be made in June and September and December.
  2. To arrive at taxable income for a Saudi Arabian business, non-deductible expenses include i) salaries paid to owners or partners or shareholders and ii) social security contributions paid abroad and iii) all kinds of provisions (e.g. end of service, provision for bad debt, etc.) and iv) indirect administrative and general expenses allocated on estimated basis and v) loan charges and vi) payment by branches to their head offices for royalties.
  3. Within four months from the end of the financial year end, the annual audited financial statements are required to be uploaded on the MOCI’s web portal. All financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS) and in Arabic.
  4. All Saudi Arabia companies are required to maintain an E-Invoicing system, directly integrated with ZATCA’s systems. Accounting records must be maintained in Arabic and kept in Saudi Arabia. Computerised accounting systems are allowed, provided they comply with the requirements of the MOC and that Arabic printouts of the accounts are generated on a regular basis.
  5. The withholding tax payer is required to i) pay tax withheld to the DZIT within 10 days of the month-end and ii) issue a certificate to the payee stating the amount of payment and tax withheld.
  6. Irrespective of value or mode of transportation, the documents required for all commercial shipments to Saudi Arabia include i) a commercial invoice and ii) a certificate of origin and iii) a bill of lading (or airway bill) steamship (airlines) company certificate and iv) an insurance certificate and v) a packing list and vi) evidence of payment to a non-resident and vii) vendor or bank guarantee.
  7. Saudi Arabia has signed the Multilateral Convention (MLI) to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS). The MLI allows countries to implement the anti-tax treaty abuse BEPS measures and other aspects of the OECD BEPS program into existing double tax treaties (DTTs).
  8. Saudi Arabia has Transfer Pricing Guidelines largely aligned with those published by the Organisation of Economic Development including the requirements to prepare the master file, local file and country-by-country report. Companies are required to furnish an annual transfer pricing return (referred to as Disclosure Form of Controlled Transactions or DFCT) along with an affidavit which is to be obtained from a Licensed Accountant, confirming whether the controlled (i.e. related party) transactions are in line with the Group’s transfer pricing policy.
  9. The levels of paid-up share capital requirement varies from US$26,000 to US$8million, depending on business activities and planned investments in the country.
  10. Company directors are appointed, replaced, and dismissed by the shareholders. The identities of shareholders and directors are on the public register.
  11. The process of deregistering a company is dictated by the government. It takes a minimum six months. Healy Consultants’ fee to project manage company de-registration is US$ 12,550 (excluding accounting and audit fees). During this six-month period it is mandatory to maintain a resident company secretary and legal registered office.
  12. Saudi Arabia is a founding member of the Gulf Cooperation Council (GCC), which also includes Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates. While still under development, the GCC Customs Union formally ensures the free movement of labor and capital within the bloc. The GCC currently maintains free trade agreements (FTAs) with Lebanon, Singapore, South Korea, Pakistan, the European Free Trade Association (Norway, Switzerland, Iceland, and Liechtenstein), and the Greater Arab Free Trade Area of 18 Arab countries.
  13. Saudi Arabia holds membership of several councils and international organizations, such as i) United Nations (UN) and ii) World Trade Organization and iii) Organization of Petroleum Exporting Countries (OPEC) and iv) Gulf Cooperation Council (GCC) and v) Organization of Islamic Cooperation (OIC) and vi) Arab League and vii) G20 and viii) BRICS.
  14. Saudi Arabia has acceded to the Paris Convention for Protection of Industrial Property including trademarks, patents, and copyright.

• How we can help our multi-national Clients

  Healy Consultants Group will be happy to help our multi-national Clients’ with:

  1. Monthly book-keeping services, maintaining accounting records in Arabic and in compliance with the requirements of the MOC.
  2. Monthly and quarterly Government reporting including i) VAT and ii) payroll and iii) withholding tax and iv) advance corporation tax payments.
  3. Human resource services including recruitment and payroll management.
  4. Supervision of the independent statutory annual audit.
  5. Timely filing of annual corporation tax return and audited financial statements.