Al Khobar
Ernst & Young & Co. (Certified Public Accountants)
General Partnership
+966 (13) 840-4600
Mail address: Fax: +966 (13) 882-0087 P.O. Box 3795
Al Khobar 31952
Saudi Arabia
Street address:
Adeer Tower, 15th Floor
Prince Turki Bin Abdulaziz Street
Al Khobar Saudi Arabia
Global Compliance and Reporting
Syed Farhan Zubair
Bilal Fahim Mian
+966 (13) 840-4866
Mobile: +966 506-310-676 Email: farhan.zubair@sa.ey.com
+966 (13) 840-4844 Mobile +966 558-202-246 Email: bilal.mian@sa.ey.com
Hatem Ghobara +966 (13) 840-4739 Mobile: +966 593-888-694 Email: hatem.ghobara@sa.ey.com
Javed Aziz Khan +966 (13) 840-4762 Mobile: +966 593-888-718 Email: javed.aziz@sa.ey.com
Business Tax Advisory
Waqas Khan
+966 (13) 840-4764
Mobile: +966 535-070-477 Email: waqas.khan@sa.ey.com
Ali K Khamis +966 (13) 840-4924 Mobile: +966 553-500-154 Email: ali.k.khamis@sa.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Barry Magill
+966 (11) 215-9863 Mobile: +966 554-208-068 Email: barry.m@sa.ey.com
Billy Thorne +966 (11) 260-5217 Mobile: +966 507-966-335 Email: billy.thorne@sa.ey.com
International Tax and Transaction Services – Transfer Pricing
Ricardo Cruz
Indirect Tax
Sanjeev Fernandez
+966 (11) 260-5680 Mobile: +966 554-671-694 Email: ricardo.m.cruz.sanchez@sa.ey.com
+966 (13) 840-4855 Mobile: +966 500-758-866 Email: sanjeev.fernandez@sa.ey.com
Mohammed Bilal Akram
+966 (11) 215-9858
Mobile: +966 580-507-766 Email: mohammedbilal.akram@sa.ey.com
Jeddah GMT
Ernst & Young & Co.
(Certified Public Accountants)
General Partnership
+966 (12) 221-8400
Mail address: Fax: +966 (12) 221-8575 P.O. Box 1994 Jeddah 21441
Saudi Arabia
Street address: 13th Floor, King’s Road Tower
King Abdulaziz Road
Al Shatea District
Jeddah Saudi Arabia
Global Compliance and Reporting
Irfan Alladin
+966 (12) 221-8510
Mobile: +966 593-888-912 Email: irfan.alladin@sa.ey.com
Ayman Abu El Ezz +966 (12) 221-8417 Mobile: +966 555-237-020 Email: ayman.abueizz@sa.ey.com
Hanif Khatri +966 (12) 221-8416 Mobile: +966 593-891-888 Email: hanif.khatri@sa.ey.com
Business Tax Advisory
Hussain Asiri
+966 (12) 221-8505
Mobile: +966 504-678-004 Email: hussain.asiri@sa.ey.com
Amro El Fadly +966 (12) 221-8415 Mobile: +966 558-659-035 Email: amro.fadly@sa.ey.com
Indirect Tax
Sanjeev Fernandez
Mohammed Bilal Akram
+966 (13) 840-4855 Mobile: +966 500-758-866 Email: sanjeev.fernandez@sa.ey.com
+966 (11) 215-9858
Mobile: +966 580-507-766 Email: mohammedbilal.akram@sa.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Barry Magill
+966 (11) 215-9863
Mobile: +966 554-208-068 Email: barry.m@sa.ey.com
Billy Thorne +966 (11) 260-5217 Mobile: +966 507-966-335 Email: billy.thorne@sa.ey.com
International Tax and Transaction Services – Transfer Pricing
Ricardo Cruz
+966 (11) 260-5680
Mobile: +966 554-671-694 Email: ricardo.m.cruz.sanchez@sa.ey.com
Ernst & Young & Co. (Certified Public Accountants)
General Partnership
Mail address: +966 (11) 215-9898
P.O. Box 2732
Fax: +966 (11) 273-4730 Riyadh 11461 Saudi Arabia
Street address: Al Faisaliah Office Tower – Levels 6 and 12 King Fahd Road Olaya, Riyadh Saudi Arabia
Global Compliance and Reporting
Asim J. Sheikh
+966 (11) 215-9876
Mobile: +966 505-188-328 Email: asim.sheikh@sa.ey.com
Imran Iqbal +966 (11) 215-9807 Mobile: +966 509-238-995 Email: imran.iqbal@sa.ey.com
Carl Suchtelen +966 (11) 277-9305 Mobile: +966 553-512-596 Email: carl.suchtelen@sa.ey.com
Suleiman Mohammed +966 (11) 215-9864 Mobile: +966 552-221-592 Email: suleiman.mohammed@sa.ey.com
Amr Farouk +966 (11) 215-9898 Mobile: +966 598-999-031 Email: amr.farouk@sa.ey.com
Mirza Ashraf +966 (11) 215-9820 Mobile: +966 593-742-224 Email: mirza.ashraf@sa.ey.com
Atif Khan +966 (11) 215-9471 Mobile: +966 594-321-845 Email: atif.khan@sa.ey.com
Business Tax Advisory
Ahmed Abdullah +966 (11) 215-9439 Mobile: +966 503-009-151 Email: ahmed.abdullah@sa.ey.com
Hosam Abdulkareem +966 (11) 215-9805 Mobile: +966 505-194-355 Email: hosam.abdulkareem@sa.ey.com
Esraa Albuti +966 (11) 215-9443 Mobile: +966 581-481-485 Email: esraa.albuti@sa.ey.com
Ahmed Aqeel +966 (11) 260-5661 Mobile: +966 056-600-0408 Email: ahmed.h.akeel@sa.ey.com
Indirect Tax
Sanjeev Fernandez +966 (13) 840-4855 Mobile: +966 500-758-866 Email: sanjeev.fernandez@sa.ey.com
Mohammed Bilal Akram +966 (11) 215-9858 Mobile: +966 580-507-766 Email: mohammedbilal.akram@sa.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Barry Magill
Billy Thorne
+966 (11) 215-9863
Mobile: +966 554-208-068 Email: barry.m@sa.ey.com
+966 (11) 260-5217
Mobile: +966 507-966-335 Email: billy.thorne@sa.ey.com
International Tax and Transaction Services – Transfer Pricing
Amr Farouk
Ricardo Cruz
A. At a glance
+966 (11) 215-9898
Mobile: +966 598-999-031 Email: amr.farouk@sa.ey.com
+966 (11) 260-5680
Mobile: +966 554-671-694 Email: ricardo.m.cruz.sanchez@sa.ey.com
Corporate Income Tax Rate (%)
Companies Engaged in Natural Gas
Investment Activities 20
Oil and Hydrocarbon
Production Companies 50 to 85 (a)
Other Companies 20
Capital Gains Tax Rate (%) 20
Withholding Tax (%) (b)
Dividends
Net Operating Losses (Years)
Carryback
Carryforward Unlimited (c)
(a) For further details, see Section B.
(b) For further details and a complete listing of withholding taxes, see Section B. The withholding tax rates in Saudi Arabia range from 5% to 20%. (c) For further details, see Section C.
B. Taxes on corporate income and gains
Income tax. Income tax is assessed on profits of the following:
• A resident capital company with respect to shares owned directly or indirectly by persons operating in oil and hydrocar bon production, with the exception of shares directly or indi rectly owned by persons engaged in the production of oil and hydrocarbons in resident capital companies that are listed in the Saudi Stock Exchange (Tadawul) and the shares owned directly and indirectly by these companies in capital companies
• A resident capital company (only on profits attributable to shares owned by non-Saudi or non-Gulf Cooperation Council [GCC] shareholders; see below)
• A resident non-Saudi or non-GCC natural person who carries on a business in Saudi Arabia
• A nonresident company that carries on business in Saudi Arabia through a permanent establishment
• A nonresident without a permanent establishment in Saudi Arabia that has taxable income from sources in Saudi Arabia (tax is assessed through withholding tax)
• A person engaged in the field of natural gas investment
• A person engaged in the production of oil and hydrocarbon materials
Partners in partnerships (that is, general partnerships, unincorpo rated joint ventures and limited partnerships) are subject to tax rather than the partnerships themselves.
For income tax purposes, non-Saudis do not include citizens (nationals) of countries that are the members of the GCC. Members of the GCC are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The share of profits at tributable to interests owned by GCC nationals in a company is subject to Zakat (see Section D). The share of profits attributable to interests owned by non-GCC nationals in that company is subject to income tax.
Rates of tax. All companies, including companies engaged in the business of natural gas investment activity, are taxed at a rate of 20%.
Companies engaged in the production of oil and other hydrocar bons (upstream business; also, see next paragraph) are subject to tax on their net profit at rates ranging from 50% to 85%. The slab rate is determined based on the capital investment of the com pany. The following are the tax rates.
Total capital investment of company
Rate of income tax (%)
More than SAR375 billion (USD100 billion) 50
SAR300 billion to SAR375 billion (USD80 billion to USD100 billion) 65 SAR225 billion to SAR300 billion (USD60 billion to USD80 billion) 75 Not more than SAR225 billion (USD60 billion) 85
Companies engaged in the production of oil and other hydrocar bons should segregate the downstream businesses from the oil and hydrocarbons production activities by carrying out the down stream business through an independent legal entity within five years, effective from 1 January 2020 (period of segregation of activities). Downstream business is all works carried out after the production of oil and hydrocarbons, which includes, but is not limited to, refining, transportation and marketing of oil and hy drocarbons products. The income tax rate on the tax base from downstream business is 20%. Complex rules apply for the calcu lation of income tax of companies engaged in the production of oil and other hydrocarbons (due to segregation of upstream and downstream activities), and it is suggested that specific advice be obtained.
Withholding tax. A Saudi resident entity, including a permanent establishment of a nonresident, is required to withhold tax from payments made to nonresidents that do not have a legal registra tion or a permanent establishment in Saudi Arabia with respect to income earned from a source in Saudi Arabia. This rule applies regardless of whether the payer is considered to be a taxpayer under the regulations and whether such payments are treated as a tax-deductible expense in the Saudi resident entity’s tax declara tion. The following are the withholding tax rates.
Type of payment Rate (%)
Payments for technical or consultancy services to unrelated parties, payments for services for international telecommunications to unrelated parties, rental, airline tickets, air or sea freight charges, dividends distributed, returns on loans (see next paragraph) and insurance or reinsurance premiums 5 Royalties, payments to the head office or any other related companies for services, including technical or consultancy services and services for international telecommunications 15 Management fees 20 All other payments 15
Loan fees (interest expenses and commissions) on interbank de posits paid to nonresident banks are exempt from Saudi withhold ing tax if such deposits remain with the Saudi resident borrower banks for a maximum period of 90 days. Resident borrower banks are required to submit an annual statement attested by the Saudi Arabian Monetary Authority listing the names of the nonresident lending banks, their addresses, periods of lending and the amount of loan fees paid.
The party withholding the tax must register with the Zakat, Tax and Customs Authority (ZATCA) before the settlement of the first tax payment. The party withholding the tax must deposit the tax withheld with the ZATCA within the first 10 days of the month following the month in which the taxable payment is made and issue a certificate to the nonresident party. A delay fine of 1% for each 30 days of delay is computed after the lapse of 30 days from the due date of tax until the date on which the tax is paid. An annual withholding tax return must be filed within 120 days following the end of the tax year.
Capital gains. In general, capital gains are treated as ordinary income, together with other income earned for the same period, at a rate of 20% if the individual is a person subject to tax in Saudi Arabia and if the gain is realized in connection with the person’s business activities. However, capital gains arising on the sale of shares traded on the stock exchange are exempt from tax in accordance with the following rules:
• For the disposal of shares traded on the Saudi Stock Exchange (Tadawul), the disposal must be done in compliance with the Capital Market Law in Saudi Arabia.
• For the disposal of shares traded on a foreign stock exchange, the securities must also be traded on the Saudi Stock Exchange (Tadawul) for the tax exemption to apply.
• In all cases, the shares must have been acquired after 30 July 2004 (the date of enforcement of Saudi tax law).
Based on a Circular issued by the ZATCA, capital gains realized from sale of the following shares in a listed entity are also eligi ble for tax exemption (if the above conditions are met):
• Sale of founders’ shares
• Sale of bonus shares (or stock dividends)
• Sale of shares through a privately negotiated transaction (pursu ant to the Saudi Capital Market Authority Law and implement ing regulations)
Administration. All persons subject to tax (excluding nonresidents who derive income from a source in Saudi Arabia and are subject to withholding tax) are required to register with the ZATCA before the end of their first fiscal year. Failure to register with the ZATCA results in the imposition of a fine ranging from SAR1,000 to SAR10,000.
A taxable entity that has a permanent establishment or commer cial registration in Saudi Arabia must file its annual tax declara tion with the ZATCA based on its accounting books and records within 120 days following the end of the tax year and pay the in come tax due with the tax declaration. However, the ZATCA may also request audited financial statements before issuing the final tax assessments.
The Saudi Arabian Income Tax Regulations require certification of annual tax declarations reporting taxable revenue in excess of SAR1 million. A locally licensed chartered accountant is required to certify the validity of the information contained in the taxpayer’s return and also certify the following:
• The information contained in the declaration is taken from the taxpayer’s books and records (maintained in Arabic and in Saudi Arabia) and is in accordance with such records.
• The return is prepared according to the standards, requirements and provisions of the Saudi Arabian Income Tax Regulations.
The nonresident partners of partnerships are subject to tax, rather than the partnerships themselves. However, partnerships must file an information declaration within 60 days after the end of the tax year.
Fines for non-submission of tax declarations by the due date may be imposed at a rate of 1% of the total revenue, with a maximum fine of SAR20,000. A fine is also calculated based on a percent age of the underpaid tax. Such a fine is payable if it exceeds the amount of the fine based on total revenue. The following are the percentages applied to underpaid tax:
• 5% of the underpaid tax if the delay is up to 30 days from the due date
• 10% of the underpaid tax if the delay is more than 30 and not more than 90 days from the due date
• 20% of the underpaid tax if the delay is more than 90 and not more than 365 days from the due date
• 25% of the underpaid tax if the delay is more than 365 days from the due date
An advance payment on account of tax for the year is payable in three installments. The installments are due by the end of the 6th, 9th and 12th months of the tax year. Each installment of advance payment of tax is calculated in accordance with the following formula:
25% x (A – B)
For the purposes of the above calculation, “A” equals the tax payer’s liability as per the tax declaration for the preceding year and “B” equals tax withheld at source for the taxpayer in the preceding year.
A taxpayer is not required to make advance tax payments in a year if the tax liability for the preceding year was less than SAR2 million.
A delay fine of 1% for each 30 days of delay after the lapse of 30 days from the due date of tax until the date the tax is paid.
Dividends. Dividends paid to nonresident shareholders are subject to withholding tax at a rate of 5% (see Withholding tax). After-tax profit remittances of a branch (permanent establishment) are also considered dividends under the Saudi Income Tax Regulations. Dividend income or bonus shares earned by a resident company on its investments in a resident or a nonresident capital company is exempt from tax if the ownership in the investee company is 10% or more and if the investment is held for a period of one year or more.
Foreign tax relief. Relief is not provided for foreign taxes paid (un less covered by a double tax treaty).
C. Determination of tax payable
Taxable profits. Tax liabilities are assessed by the ZATCA on the basis of the audited financial statements, as adjusted for tax pur poses. In certain cases (for example, permanent establishments of nonresidents that do not maintain books of accounts in Saudi Arabia, foreign airlines, and foreign freight and land and marine transport companies operating in Saudi Arabia), tax may be assessed under the “presumptive basis.” Under the presumptive basis, no financial statements are presented, and the tax liability is assessed on deemed profit calculated at rates specified in the tax regulations.
Nondeductible expenses. Certain expenses are not deductible in calculating taxable profit, including the following:
• Expenses not connected with the earning of income subject to tax
• Payments or benefits to a shareholder, a partner or their rela tives if they constitute salaries, wages, bonuses or similar items or if they do not represent an arm’s-length payment for prop erty or services
• Entertainment expenses
• Expenses of a natural person for personal consumption
• Income tax paid in Saudi Arabia or another country
• Financial penalties and fines paid or payable to any party in Saudi Arabia except those paid for breach of contractual terms and obligations
• Payments of bribes and similar payments, which are considered criminal offenses under the laws of Saudi Arabia, even if paid abroad
Allocation of overhead and indirect expenses. A branch of a non resident company cannot claim deductions for head office costs that are allocated to the branch on an estimated or allocation basis. However, certain certifiable direct costs incurred abroad are deductible.
Technical costs. For tax purposes, in general, technical costs are expenses that relate to engineering, chemical, geological or industrial work and research even if incurred wholly abroad by the main office or other offices. These costs are generally allowed as deductions if they can be substantiated by certain documents, such as technical services agreements, head office auditors’ cer tificates and invoices.
Under the tax regulations, payments for technical and consultancy services rendered by third parties (including foreign sharehold ers) are subject to withholding tax at a rate of 5%. However, such payments to nonresident related parties are subject to a 15% with holding tax (for details regarding withholding taxes, see Section B).
Contributions to foreign social insurance, pension and savings plans. Contributions to a retirement fund, social insurance fund or any other fund established in or outside Saudi Arabia for the purpose of an employee’s end-of-service benefits (retirement) or to meet the employee’s medical expenses is deductible if all of the follow ing conditions are satisfied:
• The fund has an independent legal status and has financial statements audited by an independent licensed auditor.
• The allowable deduction does not exceed the unfunded liabili ties at the beginning of the year.
• The entitlement to the benefit is mentioned in the employment contract.
• The employer submits the fund’s information to the ZATCA.
Contributions to Saudi social insurance with respect to an employee’s share are not deductible from Saudi-source revenue.
Provisions and reserves. Provisions for doubtful debts, termina tion benefits and other similar items are not deductible. Specific write-offs and actual employment termination benefit payments that comply with Saudi Arabian labor laws are deductible. Provisions for doubtful debts are allowed as deductible expenses for banks if they are confirmed by the Saudi Arabian Monetary Agency.
Interest deductibility. Deductions may be claimed for loan fees (interest expenses and commissions) incurred with respect to the earning of income subject to tax. However, the maximum deduc tion for loan fees is restricted to the lower of the following:
• Loan fees paid during the year
• Total of loan income plus 50% of tax-adjusted profits (exclud ing loan fees and loan income)
Loan fees exceeding this restriction are disallowed as a deduction and may not be carried forward to future years. Banks are exclud ed from the above limitation.
Saudi Arabian tax law does not contain any specific provisions on thin capitalization other than the limit on the interest deduction described above.
Depreciation. Depreciation is calculated for each group of fixed assets by applying the prescribed depreciation rate to the remaining value of each group at the fiscal year-end.
The remaining value for each group at the fiscal year-end is cal culated as follows:
The total remaining value of the group at the end of the preceding fiscal year X + 50% of the cost of assets added during the current year and the preceding year X 50% of the proceeds from assets disposed of during the current year and the preceding year, provided that the balance is not negative (X) = Remaining value for the group X
The tax law provides the following depreciation rates.
Asset Rate (%)
Land (non-depreciable) 0
Fixed buildings 5
Industrial and agricultural movable buildings 10 Factories, plant, machinery, computer hardware and application programs (computer software) and equipment, including cars and cargo vehicles 25 Expenses for geological surveying, drilling, exploration expenses and other preliminary work to extract natural resources and develop their fields 20
All other tangible and intangible depreciable assets that are not included in the above groups, such as furniture, aircraft, ships, trains and goodwill 10
Assets acquired under build-operate-transfer (BOT) or buildoperate-own-transfer (BOOT) contracts must be depreciated over the period of contract or the remaining period of contract.
Cost of repairs or improvements of fixed assets are deductible, but the deductible expense for each year may not exceed 4% of the remaining value of the related asset group at year-end. Excess amounts must be added to the remaining value of the asset group and depreciated.
Relief for losses. Losses may be carried forward indefinitely. However, the maximum loss that can be offset against a year’s profit is 25% of the tax-adjusted profits for that year. Saudi tax regulations do not provide for the carryback of losses.
If a change of 50% or more occurs in the underlying ownership or control of a capital company, no deduction is allowed for the nonSaudi share of the losses incurred before the change in the tax years following the change, unless the company continues with the same business activities.
D. Other significant taxes
The following table summarizes other significant taxes.
Other significant taxes Rate (%)
Zakat; a religious levy imposed on the shareholders in Saudi Arabian companies; Zakat is calculated and paid by a Saudi Arabian resident capital company on behalf of its individual or corporate shareholders; Zakat is levied on the Zakat base of a resident capital company; the Zakat base is broadly calculated as capital employed (for example, share capital and retained earnings) that is not invested in fixed assets, long-term investments and deferred costs, as adjusted by net results of operations for the year that is attributable to Saudi or GCC shareholders; complex rules apply to the calculation of Zakat liabilities, and it is therefore suggested that Zakat payers seek specific advice suited to their circumstances
Value-added tax
Excise tax 50/100
Social security contributions
Social insurance tax (GOSI)
Annuity (pension) for Saudi nationals Employer share
Employee share
Occupational hazard; payable by employer; applicable to Saudi nationals and expatriates
Unemployment insurance (SANID); applicable to Saudi nationals only Employer share
Employee share
E. Miscellaneous matters
Foreign-exchange controls. Saudi Arabia does not impose foreignexchange controls.
Supply and erection contracts. Profits from “supply only” opera tions to Saudi Arabia are exempt from income tax (whether the contract is made inside or outside Saudi Arabia) because the supplier trades “with” but not “in” Saudi Arabia. The net profits of operations that include supply, erection or maintenance are subject to tax, and the contractors are required to register with the ZATCA and submit a tax declaration in accordance with the tax regulations.
The following information must generally be submitted in support of the cost of imported materials and equipment:
Invoices from the foreign supplier
Customs clearance document
• If the supplying entity is the head office of the Saudi Arabian branch, a certificate from the external auditor of the head office confirming that the cost claimed is equal to the international market value of the equipment supplied (usually the contracted selling price)
In general, no profit results in the Saudi Arabian books on materials and equipment supplied, because the revenue from the sale of equipment equals the cost based on the sales value declared for customs.
Subcontractors. Payments to subcontractors, reported by a tax payer in its tax return, are subject to close scrutiny by the ZATCA. The taxpayer is required to withhold tax due on pay ments to nonresident subcontractors and to deposit it with the ZATCA unless the taxpayer can provide a tax file number or tax clearance certificate as evidence that such subcontractor is set tling its tax liability.
Tax is not required to be withheld from payments to subcontrac tors resident in Saudi Arabia. However, government procurement regulations provide for the retention of 10% of the contract value until the completion of the statutory formalities including the submission of the certificate from the ZATCA.
Imports from head office and affiliates. A Saudi “mixed” entity (with Saudi/GCC shareholders and non-Saudi/non-GCC shareholders) is expected to deal on an arm’s-length basis with its foreign shareholders or any company affiliated with its foreign shareholders. The company may be required to submit to the ZATCA a certificate from the seller’s auditors confirming that the materials and goods supplied to the Saudi Arabian company were sold at the international market price prevailing at the date of dispatch. This requirement also applies to foreign branches importing materials and goods from the head office for the ful fillment of their Saudi contracts.
Transfer pricing. Transfer pricing (TP) bylaws, which were issued in February 2019, contain mandatory legislative provisions re garding transactions among related parties and documentation requirements following the Base Erosion and Profit Shifting (BEPS) Action 13 standard. They also prescribe TP methods and establish other administrative procedures, including the submis sion of related-party disclosure forms and TP affidavits.
The TP bylaws require Saudi Arabian entities and permanent establishments, including branches of foreign companies that are subject to the Corporate Income Tax Law, which includes mixed entities in Saudi Arabia (those that pay both corporate tax and Zakat), to maintain a TP Master File and Local File if the aggre gate arm’s-length value of the transactions between related par ties exceed the minimum threshold of SAR6 million. The taxpayers, including mixed entities, are also required to file the TP disclosure form together with the corporate income tax return and submit a TP affidavit issued by a licensed accountant in Saudi Arabia.
In addition, entities that are members of multinational enterprise groups (either Zakat or corporate income tax taxpayers) with consolidated group revenue exceeding SAR3.2 billion during the year immediately preceding the current reporting year must sub mit a Country-by-Country (CbC) report within 12 months after the end of the group’s fiscal year. They can also submit the CbC report at the location of their headquarters instead of Saudi Arabia or other jurisdictions in which they operate if there is an active CbC exchange mechanism between Saudi Arabia and these countries. Moreover, these qualifying multinational enter prises also need to file a CbC reporting notification together with their annual tax return and in the Automatic Exchange of Information (AEOI) portal of the Saudi Arabian tax authority within 120 days after the end of the fiscal year.
Mutual agreement procedure. ZATCA recently published Mutual Agreement Procedure (MAP) Taxpayer Guidance (MAP Guidance). Taxpayers in Saudi Arabia may choose to initiate MAP requests to relieve double taxation or resolve treaty-based tax disputes in a timely manner, if they believe that tax was not applied in accordance with the relevant treaty.
The MAP Guidance was issued to facilitate access to the MAP and includes information on how a MAP request should be initi ated, to whom it should be presented and what information should be included in the request. This is in line with Saudi Arabia’s commitment to the BEPS Action 14 minimum standard as a member of the BEPS Inclusive Framework.
Electronic invoicing (e-invoicing). On 8 August 2021, the ZATCA issued a detailed guide which aims to simplify and clarify the end-to-end journey of taxable persons through electronic invoic ing, their obligations and the overall solution requirements to comply with electronic invoicing regulations.
F. Tax treaties
The table below shows the withholding rates for dividends, inter est and royalties provided under Saudi Arabia’s double tax trea ties that are in force and effective as of 1 January 2022.
Certain other tax-exempting provisions (for example, for sover eign wealth funds) are contained in certain protocols to Saudi tax treaties.
To benefit from the reduced rates or exemptions under double tax treaties, additional conditions should be met (for example, the recipient is required to be the beneficial owner of the related gain). Readers should seek professional advice with respect to the application of Saudi tax treaties.
The treaty benefits are not applicable automatically and should be claimed from the ZATCA in each particular case by submit ting the Q7-B form and other supporting documents (for exam ple, tax residence certificate). The taxpayer may claim the treaty benefit up front and follow double tax treaty rules, or the tax payer may pay the tax under domestic income tax law and then claim a refund from the ZATCA.
Dividends Interest Royalties % % %
Albania 5 6 5/8 (h)
Algeria 0 0 7
Austria 0/5 (a) 0/5 (a)(b) 10
Azerbaijan 5/7 (c) 0/7 (a)(d) 10
Bangladesh 0/10 (a) 0/7.5 (a) 0/10 (a)
Belarus 0/5 (a) 0/5 (a) 10
Bulgaria 0/5 (a) 0/5 (a) 5/10 (h)
China Mainland 0/5 (a) 0/10 (a)(e) 10
Cyprus 0/5 (a)(i) 0 5/8 (h)
Czech Republic 5 0 10
Egypt 0/5/10 (a)(f) 0/10 (a) 0/10 (a)
Ethiopia 5 0/5 (a) 7.5
France 0 0 (g) 0
Gabon 5 7.5 10
Georgia 0/5 (a) 0/5 (a) 5/8 (h)
Greece 0/5 (a) 0/5 (a) 0/10 (a)
Hong Kong 5 0 5/8 (h)
Hungary 5 0 5/8 (h)
India 5 0/10 (a) 10
Ireland 0/5 (a)(i) 0 5/8 (h)
Italy 5/10 (j) 0/5 (a) 10
Japan 5/10 (k) 0/10 (a)(e) 5/10 (h)
Jordan 5 0/5 (a) 7
Kazakhstan 0/5 (a) 0/10 (a) 0/10 (a) Korea (South) 5/10 (j) 0/5 (a)(l) 5/10 (h)
Kosovo 0/5 (x) 0/5 (a)(l) 5/10 (h)
Kyrgyzstan 0 0 7.5
Luxembourg 5 0 5/7 (h)
Malaysia 5 0/5 (a) 8 Malta 5 0 5/7 (h)
Mexico 0/5 (a) 0/5/10 (a)(n) 10
Netherlands 5/10 (o) 0/5 (a) 7
North Macedonia 5 0/5 (a)(m) 10
Pakistan 5/10 (p) 0/10 (a) 10
Poland 5 0/5 (a)(m) 10
Portugal 5/10 (q) 0/10 (a)(m) 8
Romania 0/5 (a) 0/5 (a)(b) 10
Russian Federation 0/5 (a) 0/5 (a)(m) 10
Singapore 0/5 (a) 0/5 (a) 8
South Africa 0/5/10 (a)(o) 0/5 (a) 0/10 (a)
Spain 0/5 (i) 0/5 (a) 8
Sweden 5/10 (r) 0 5/7 (h)
Switzerland 5/15 0/5 5/7
Syria 0 0/7.5 (a) 15
Taiwan 12.5 10 4/10 (y)
Tajikistan 0/5/10 (a)(j) 0/8 (a) 8
Tunisia 0/5 (a) 0/2.5/5 (a)(s) 0/5 (a)
Turkey 5/10 (f)(t) 0/10 (a) 10
Turkmenistan 10 0/10 (a) 10
Ukraine 0/5/15 (a)(f) 0/10 (a) 10
United Arab Emirates 0/5 (a) 0 0/10 (a)
United Kingdom 515 (u) 0 5/8 (h)
Uzbekistan 0/7 (a) 0/7 (a) 0/10 (a)