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 generally a flat rate of 20%. The corporate income tax rate would differ for companies involved in the oil and natural gas business;
- Capital gains tax is 20%. This rate can be reduced or completely relieved by a double tax treaty;
- The VAT rate is 5% since January 2018;
- The VAT tax would exclude 95 food items as well as Health, education, and social services but would be applicable for all citizens and residents;
- Service payments made to a non-resident from Saudi Arabia are subject to withholding taxes (“WHT”) rates between 5% and 20% based on i) the type of service and ii) whether the beneficiary is a related party;
- There is no form of stamp duty, transfer, excise, sales, turnover, production, real estate, or property tax for foreigners.
Reporting and accounting considerations
- Unless advised otherwise by our Client, the tax filings are based on the company’s fiscal-year;
- Tax returns are due to be filed with the Department of Zakat and Income Tax (DZIT) and tax due must be paid within 120 days after the taxpayer’s year end. The system is one of self-assessment;
- 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 the tax withheld to the DZIT within 10 days after the end of the month and ii) to issue a certificate to the payee stating the amount of payment and the tax withheld.
- Customs duties are imposed on importation of many goods. Most items are subject to a 5% tariff;
- Effective from 2nd January 2017, the Saudi Arabia Government terminated certain subsidies. Unfortunately, this has resulted in an increase in the 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 (click link);
- 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 they will fulfill those 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 requirements varies from US$26,000 to US$8million, depending on business activities and planned investments in Saudi;
- 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;
- 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$8,550 (excluding accounting and audit fees). During this 6 months period it is mandatory to maintain a resident company secretary and a legal registered office;
- In 2004, the Kingdom of 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 KSA, before securing an Iqama (valid employment visa).
- The KSA government has long implemented various “Saudization” policies intended to encourage employers to hire Saudi nationals in preference to foreign expatriates. A system called “Nitaqat” also exists, by which employers are penalized if they fail to achieve the Saudization targets;
- Before a company can apply for an employee visa for a 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 are required to make contribution at the rate of 9% of salary 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 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.