Income tax in Saudi Arabia
Taxation Researcher | December 15, 2020
Non-Saudi and non-GCC nationals are liable to income tax. Saudi and GCC national are liable to zakat, which is an Islamic direct tax on property and income.
Taxable income is (1) business income and (2) professional income.
Non-Saudi and Non-GCC National
Non-Saudi and non-GCC nationals are taxed on their Saudi Arabia-sourced income. Income tax is generally levied at 20%.
Saudi and GCC National
Zakat is an Islamic direct tax on property and income. Zakat is payable by citizens of the Gulf Cooperation Council (GCC) in lieu of the income tax. It is levied on the taxpayer´s total capital resources and income that are not invested in real estate.
Zakat is levied at a flat rate of 2.5%.
Saudi individuals earning income from business activities in the natural gas and oil sectors are subject to income tax. Non-Saudi individuals are taxed on any income from a business activity in Saudi Arabia. The following tax rates are applicable:
- 85% (whether Saudis or aliens) for individuals carrying on activities in the oil sector
- 30% (whether Saudis or aliens) for individuals carrying on activities in the natural gas sector
- 20% in all other cases (for alien companies, for resident aliens, and nonresident individuals carrying an activity through a permanent establishment in the country)
No tax is levied on capital gains realized by individuals from selling property, unless it is derived from a business or professional activity. Capital gains derived from trade or business are subject to tax.
Capital gains derived from trade or business are subject to 20% capital gains tax. Taxable capital gains are calculated as market value or selling price less acquisition costs and related expenses.
There is no real estate tax in Saudi Arabia, but zakat may be payable on real estate if held for speculative purposes.
Land TaxLand tax may be levied at a rate of 2.5% on undeveloped land within urban boundaries.
Non-Saudi and Non-GCC Companies
Alien companies, or non-Saudi and non-GCC national companies, are taxed at a flat rate of 20% on their income and capital gains. Income-generating expenses are deductible when computing for the taxable income.
Saudi and GCC Companies
Income of GCC-enterprises is subject to a withholding of zakat at 2.5%.