Saudi Vision 2030
Though Saudi Arabia is often regarded as a tax-free haven, businesses in the Kingdom are still required to navigate a variety of tax regulations. These taxes are designed to support the country's economic growth under Vision 2030, a strategic framework to reduce dependence on oil.
From corporate income taxes to unique levies like Zakat, understanding these obligations is a crucial part of succeeding in the region. Below, we’ve put together a comprehensive guide to help familiarize yourself with corporate taxes in Saudi Arabia.
Keep reading for valuable information that can give your commercial projects an edge in the market.
Saudi Arabia’s Tax System
Although individual income taxes are not the norm, businesses and certain types of transactions may still be subject to specific taxes. Let's explore some of these taxes and what they'll mean for you:
- Business Taxes - Saudi Arabian companies are subject to corporate income tax and self-employed income tax at a rate of 20% on net business profits.
- VAT - Businesses registered for VAT are required to pay VAT at a standard rate of 15%.
- Withholding Taxes (WHT) - Non-residents earning income from Saudi Arabia are required to pay withholding taxes. These rates range from 5% to 20%, depending on the nature of the income.
- Real Estate Transaction Tax (RETT) - Introduced in October 2020, RETT applies to property transactions at 5% of the transaction value.
- White Land Tax (WLT) - Owners of vacant urban land that’s designated for commercial or residential applications are charged an annual tax that comes to 2.5% of the property’s market value.
- Social Security Contributions - Saudi employees are expected to contribute up to 10% of their salary to social security, with employers contributing up to 12%.
- Zakat - This is an Islamic charitable tax charged on the net worth of Saudi nationals and businesses.
Who is responsible for collecting these taxes? The Zakat, Tax, and Customs Authority (ZATCA) handles the collection of taxes and fees, maintains customs policies, and establishes a streamlined financial system.
New Taxes in 2024
Recent reforms in Saudi Arabia reflect the government's efforts to improve the environment for businesses, particularly for multinational corporations.
These reforms include a 30-year tax relief initiative that allows multinational corporations to benefit from a 30-year corporate income and withholding exemption for approved operations.
Additionally, Saudi Arabia began a Tax Amnesty initiative in 2020 that provided relief to businesses during the COVID-19 pandemic. This project ended in June 2024, but greatly helped reduce fines and penalties for certain business types.
How Do Taxes Work for Expats?
Tax obligations for expats in Saudi Arabia are determined by their residency status. For example, an expat is considered a Saudi tax resident if they maintain a permanent residence in the Kingdom. Saudi residents are expected to contribute to:
- Social Security Contributions - Applicable to expats with permanent residency.
- VAT and Excise Duties - These are indirect taxes that may affect expats through their purchases.
- Zakat - While not required for expats, some may choose to contribute voluntarily.
Understanding these obligations can help your business operations run smoothly, ethically, and legally.
MSZ Consultancy Can Help You Navigate Saudi Arabian Taxes
Navigating Saudi Arabia's tax regulations can be a complex process, especially for businesses and expats unfamiliar with the system. But it doesn’t have to be! MSZ Consultancy specializes in company setup in Saudi Arabia and guiding companies and individuals in the Kingdom, and we have the experience to assist you.
Our experts can help you understand your tax obligations, optimize financial strategies and legal frameworks, and guarantee that you're operating in line with government and local regulations.
Call our expert today at +971 50 487 2208 to find out what we can do for you. We'll help you from start to finish and lead your business to the success it deserves.
