The absence of personal income tax in Saudi Arabia is one of the compelling reasons for international companies to expand there. The country’s economy is built around oil – Saudi Arabia has 15% of the world’s known reserves and is the largest global exporter of crude oil. Aside from the oil fields, the Saudi Arabian government encourages diversification and is licensing major multinationals to rival the United Arab Emirates as the region’s leading business hub. These advantages must be balanced against the challenges of dealing with payroll and employment regulations for your staff.
Handling these issues from overseas always poses complications that demand top-rated guidance. Bradford Jacobs has over two decades of experience among front-line payroll providers worldwide, and we ensure our clients comply with every aspect of legislation wherever they operate. Our local ‘know-how’ plus international expertise is essential for international companies expanding into Saudi Arabia and spreading throughout the Middle East and Asia. From locating the brightest talent to running your payroll, our Professional Employer Organisation (PEO) and Employer of Record (EOR) specialists will guide you every step of the way!
Personal Income Tax (PIT):
There is no personal income tax in Saudi Arabia on Saudi-sourced income, removing the need for registration, reporting, residence qualifications or filing, except for the self-employed.
Employee Social Insurance Taxes:
The General Organisation for Social Insurance (GOSI) collects 10% from Saudi Arabian employees on the payroll, 9% going to social insurance and pension, with 1% to unemployment insurance. Expats do not contribute, except for 2%, to occupational hazard insurance.
Corporate Income Tax:
Corporate income tax is 20% on net profits, plus 2.5% on the company’s Zakat base, assessed on the entity’s net worth. Zakat is an assessment under Islamic law to go for religious and charitable purposes. Tax rates on income from oil and hydrocarbon production range from 50% to 85%. The company’s tax year generally begins when it receives its business license, although exceptions can apply.
Value Added Tax (VAT):
The standard rate on goods and services is 15%, which increased from 5% in July 2020. The registration threshold is SAR 375,000 (€99,200, US$99,900). Voluntary registration is allowed if turnover exceeds SAR 187,500 (€49,550, US$49,950). Returns can be filed monthly or quarterly, depending on turnover, with filing and payment made by the end of the following month.
Withholding Tax (WHT):
The domestic rates are 5% on dividends and interest and 15% on royalties. Non-residents earning Saudi-sourced income have tax withheld at rates of 5%, 15% or 20%, depending on the type of service.
Customs and Excise Duties:
Excise duties are tobacco (100%), soft drinks (50%) and energy drinks (100%). Customs duty is applied according to the regulations of Saudi Arabian Customs.
Capital Gains Tax (CGT):
A levy of 20% applies when a non-resident shareholder disposes of shares in a resident company.
White Land Tax (WLT): Since 2015, owners of vacant, undeveloped land have been subject to an annual 2.5% tax based on the market value of the land.
Corporate Deductions and Allowances:
Expenses relating to the business are generally deductible. Depreciation is permissible at rates between 5% and 25% on fixed and movable buildings, machinery and equipment, various vehicles, software, geological surveys, drilling exploration, aircraft, ships and trains, and goodwill.
There are no consumption taxes or net wealth, inheritance, estate, gift or property taxes.
There is no personal income tax in Saudi Arabia. Therefore no rules apply to individuals for registration, reporting or filing, except for the self-employed who must file returns.
In this case, taxpayers must:
Employers contribute to the compulsory health and social insurance program for Saudi Arabian citizens. Employers contribute 12% of payroll, 9% to social insurance, 2% to occupational hazard insurance, and 1% to unemployment insurance.
Citizens from the other five Gulf Cooperation Council (GCC) nations, Bahrain, Kuwait, Oman, United Arab Emirates and Qatar, are treated as Saudi Arabians.
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