Income Tax Law

Purpose and scope

• Imposes income tax on resident capital companies for shares owned by non-Saudis, on non-Saudi resident individuals doing business, on non-residents doing business through a permanent establishment or with Saudi-source income, and on those in gas and oil (Article 2 as amended).
• An individual is resident if they have a permanent home and stay at least thirty days in the year, or stay at least 183 days (Article 3).

Key rules, rights and obligations

• The tax rate is 20% of the tax base for resident capital companies, non-Saudi resident individuals and non-residents with a permanent establishment, with special rates for gas and oil (Article 7).
• Ordinary and necessary expenses of earning income are deductible (Article 12), as are donations to public bodies or licensed charities under the rules (Article 11).
• Activity must be registered with the authority before the end of the first financial year (Article 57), and the return filed within one hundred and twenty days of the tax year end with the tax paid (Article 60).

Violations, penalties and common problems

• Failure to file: a fine of 1% of gross revenue up to twenty thousand riyals, or a share of unpaid tax rising from 5% to 25% by length of delay if higher (Article 76).
• Late payment: 1% of unpaid tax for each thirty days of delay (Article 77).
• Fraud: 25% of the tax difference for false books or documents, forged invoices, undisclosed activity or destroying records (Article 77).

Procedures and key deadlines

• The authority may make or amend an assessment by reasoned notice within five years of the filing deadline, or within ten years if no return was filed or it was incomplete or misleading; the taxpayer may claim refunds of overpayments within five years (Article 65).
• Authority decisions are challenged under the rules of the committees for resolving tax violations and disputes (Article 66 as amended), and claims are not heard after five years from the due date or knowledge unless the committee accepts an excuse (Article 67 as amended).
• Tax may be paid in instalments where there are sufficient reasons (Article 71).

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.