Accounting and tax
Healy Consultants assists our Client’s timely discharge their annual legal, accounting and tax obligations.
Saudi Arabia taxation
- The income tax rate on taxable net income allocated to foreign shareholders is 20%. The corporate income tax rate differs for companies involved in oil and natural gas;
- Capital gains tax is 20%. This can be reduced or completely relieved by a double tax treaty;
- The VAT rate is 5%. VAT will increase to 15% from July 2020;
- Service payments made to a non-resident from Saudi Arabia are subject to withholding tax of between 5% and 20% based on i) type of service and ii) whether the beneficiary is a related party;
- There is no capital duty, stamp duty, payroll tax, transfer, excise, sales, turnover, production, real estate, or property tax for foreigners;
- 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.
Reporting and accounting considerations
- Tax filings are based on the company’s fiscal year;
- Tax returns are to be filed with the Department of Zakat and Income Tax (DZIT) and tax must be paid within 120 days of the taxpayer’s year end. The system is one of self-assessment;
- Audited financial statements must be submitted annually;
- Resident companies and individuals settle their tax liabilities either by monthly payments, third party withholdings, or a combination of both;
- 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;
- Accounting records must be maintained in Arabic and in Saudi Arabia;
- Saudi Arabia accounting is fully compliant with international IFRS.
- Customs duties are imposed on import of many goods. Most items are subject to a 5% tariff;
- Effective 2 January 2017, the Saudi government terminated certain subsidies. Unfortunately, this has resulted in an increase in customs duty rates from 5% to up to 25% for 193 products. A full list of the impacted HS codes and new duty rates can be found on the KSA Ministry of Finance;
- 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.
It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and that they fulfill these obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
Saudi Arabia company laws
- 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;
- Company directors are appointed, replaced, and dismissed by the shareholders. The identities of shareholders and directors are on the public register;
- A Saudi Arabia LLC must transfer 10% of net profits each year to a legal reserve until such a reserve reaches 50% of the paid-up share capital;
- 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$8,550 (excluding accounting and audit fees). During this six-month period it is mandatory to maintain a resident company secretary and legal registered office;
- In 2004, Saudi Arabia acceded to the Paris Convention for Protection of Industrial Property including trademarks, patents, and copyright;
- No foreigner can be appointed as bank signatory to a corporate bank account in Saudi Arabia without an Iqama (valid employment visa).
- The Saudi government’s Saudisation policies encourage employers to hire Saudi nationals ahead of foreign expatriates. A system called Nitaqat also exists, by which employers are penalised if they fail to achieve Saudisation targets;
- Before a company can apply for an employee visa for foreign staff, the company must hire a national employee;
- Social insurance in the Kingdom is administered by the General Organization for Social Insurance (GOSI). Employers must make contributions at the rate of 9% of the salary of a Saudi employee. Who must contribute same percentage of their salary;
- Employers are also required to contribute 2% of an employee’s basic salary for both Saudi and non-Saudi employees, to cover the job hazards risk.
Wages Protection System (WPS) in Saudi Arabia
What is the WPS?
- The WPS ensures private companies in Saudi Arabia pay employee salaries and social security contributions i) on time and ii) in accordance with employment contracts registered with the General Organization of Social Insurance (GOSI);
- All privately-held companies registered in Saudi Arabia with 20 or more employees must submit a payroll file, generated by their bank, to the Ministry of Labour & Social Development (MLSD);
- Prior to mandatory WPS registration, companies must ensure:
- all employees are registered with GOSI;
- all employees have opened a local Saudi riyal bank account;
- they register for their Saudi bank’s payroll program;
- they have activated their MLSD profile to upload digital WPS files.
WPS reporting flow
- Calculate accurate payroll output in accordance with the labour file registered with GOSI;
- Supply the bank the WPS database file in the correct format (as prescribed by the bank);
- Submit an e-signed WPS file generated by the bank after payment of salaries to the MLSD portal.
- Organisations that i) (continuously) fail to adhere to WPS reporting guidelines ii) do not address concerns raised by the MLSD and iii) are found guilty for breaching employee contracts concerning salary payments, may be subject to severe fines and/or penalties that affect their ability to maintain and recruit manpower;
- Examples of negative consequences include:
- reduction of the quota of expatriates eligible for a work permit;
- non-renewal of existing work permits;
- inability to transfer sponsorship of expatriate employees.
- If required, Healy Consultants Group’s dedicated accounting and payroll manager will complete monthly WPS and payroll management for our Clients. Monthly fees vary according to the number of employees.