In force Last amended 11/7/1439 AH
Saudi Income Tax Law
نظام ضريبة الدخل
The Income Tax Law imposes tax on the income of individuals and on income or profit from capital investments. It sets out who is subject to tax, the rates and the amounts on which tax is due, and who is exempt.
- Articles
- 81
- In force
- 81
- Amended
- 9
- Issued
- 15/1/1425 AH
Issued by: مرسوم ملكي رقم م/1 بتاريخ 15 / 1 / 1425 · قرار مجلس الوزراء رقم 278 بتاريخ 20 / 11 / 1424
Each article shows the official Arabic text, which is the only legally binding version, followed by our plain-English explanation.
Browse Income Tax Law by topic
Persons Subject to Income Tax3 articlesTax Residence and Permanent Establishment3 articlesIncome Tax Rate and Tax Base6 articlesTaxable Income and Exemptions9 articlesDeductible Expenses and Losses13 articlesDepreciation of Assets for Tax6 articlesTax Accounting Rules14 articlesTax on Partners in Companies8 articlesNatural Gas Investment Tax12 articlesWithholding Tax on Non-Residents1 articleTax Return and Registration8 articlesTax Assessment and Anti-Avoidance7 articlesObjecting to the Tax Assessment3 articlesPaying and Collecting Income Tax9 articlesIncome Tax Penalties7 articles
Articles of the Saudi Income Tax Law
الفصل الأول: تعريفاتArticles 1–1
الفصل الثاني: المكلفونArticles 2–5
- Article 2The article sets the categories of persons subject to income tax: resident capital companies on the shares of non-Saudis and of oil and hydrocarbons production workers, resident non-Saudi individuals, non-residents, and those working in natural gas and oil.Amended
- Article 3The article sets out when a natural person or a company is considered resident in the Kingdom during the tax year for income tax purposes.
- Article 4The article defines a non-resident's permanent establishment in the Kingdom, listing the cases that count as a permanent establishment and the purposes for which a place is not a permanent establishment.
- Article 5The article lists the cases in which income is treated as arising from a source in the Kingdom, and provides that the place of payment does not determine the source of income.
الفصل الثالث: الوعاء الضريبي وأسعار الضريبةArticles 6–7
- Article 6أ - الوعاء الضريبي لشركة الأموال المقيمة هو حصص الشركاء غير السعوديين من دخلها الخاضع للضريبة من أي نشاط من مصادر في المملكة محسوما منه…
- Article 7The article sets the income tax rates: 20% for resident capital companies, resident foreign individuals, permanent establishments and natural gas, and 85% for oil production, and refers withholding rates to Article 68.
الفصل الرابع: الدخل الخاضع للضريبةArticles 8–11
- Article 8الدخل الخاضع للضريبة هو إجمالي الدخل شاملا كافة الإيرادات والأرباح والمكاسب مهما كان نوعها ومهما كانت صورة دفعها الناتجة عن مزاولة النشاط…Amended M/70
- Article 9The article sets how to calculate profit or loss on disposing of assets, the basis of their cost, and the cases of gifting, inheritance, compulsory disposal and transfer to personal use.
- Article 10The article exempts from income tax gains on selling securities traded on the Saudi financial market under the Regulations' rules, and gains on disposing of property that is not an activity asset.
- Article 11The article allows donations paid during the tax year to public bodies or licensed non-profit charities permitted to receive donations to be deducted when determining the tax base.
الفصل الخامس: مصاريف تحقيق الدخلArticles 12–21
- Article 12The article allows deducting all ordinary and necessary expenses of earning taxable income, paid or accrued during the tax year, except capital expenses and what the Law prohibits.
- Article 13The article lists the expenses that may not be deducted from the tax base, such as expenses unrelated to income, amounts to partners and their relatives, entertainment, fines, bribes and income tax.
- Article 14The article allows deducting bad debts arising from sales of goods or services previously declared as revenue, once written off the books with suitable evidence that collection is impossible under the Regulations.
- Article 15The article prohibits deducting any reserves or provisions, except provisions for doubtful debts in banks, and leaves it to the Regulations to set the rules and controls for these provisions.
- Article 16The article allows deducting research and development expenses connected with earning taxable income, and bars deducting the purchase of land or research equipment, as equipment is depreciated under Article 17.
- Article 17The article allows deducting depreciation of assets other than land, divides them into groups at 5%, 10%, 25%, 20% and 10%, and sets how the remaining value of each group is calculated.
- Article 18The article allows deducting repair and improvement expenses on depreciated assets in each group up to 4% a year of the group's remaining value, and the excess is added to the group's remaining value.
- Article 19The article provides for deducting geological survey expenses and preliminary work for extracting natural resources as amortization at the Article 17 rate as a separate group, and applies it to buying survey and exploitation rights.
- Article 20The article allows deducting an employer's contributions for an employee to a statutory pension fund up to 25% of the employee's income, and does not allow deducting the employee's own contributions.
- Article 21أ - يجوز ترحيل صافي الخسائر التشغيلية إلى السنة الضريبية التي تلي السنة التي تحققت فيها الخسارة ، وتحسم الخسارة المرحلة من الوعاء الضريبي…Amended M/70
الفصل السادس: قواعد المحاسبة الضريبيةArticles 22–27
- Article 22The article sets the tax year as the State's fiscal year, allows using another twelve-month period under the Regulations, and deals with changing the year and with groups of related companies.
- Article 23The article requires the taxpayer to use an accounting method that shows his income clearly, states when the cash or accrual basis is used, and requires the Authority's approval to change accounting policy.
- Article 24The article provides that a person using the cash basis records income when it is received or when it is ready to be received, and expenses when they are paid.
- Article 25The article provides that a person using the accrual basis records income and expenses when they fall due, and sets when an amount becomes payable to or by the taxpayer.
- Article 26The article provides that, for a person using the accrual basis, income and expenses of long-term contracts are calculated by the proportion of work completed during the year, and defines a long-term contract.
- Article 27The article requires anyone holding inventory to keep stocktaking records, allows deducting the cost of goods sold, and sets how it is calculated and how closing stock is valued at the lower of cost or market.
الفصل السابع: قواعد إضافية لتحديد الوعاء الضريبيArticles 28–35
- Article 28The article provides that income and expenses relating to jointly owned property are allocated among the partners in accordance with their ownership shares in it.
- Article 29The article provides that property, services and non-cash benefits are valued at market value on the date they are recorded in the books, without regard to restrictions on transferring ownership of the asset to the employee or service provider.
- Article 30The article provides that total income and the tax base are calculated in Saudi riyals, and that foreign amounts are converted at the exchange rate announced by the Saudi Arabian Monetary Authority on the date of the transaction.
- Article 31The article requires including in the taxpayer's total income any payment from which he benefits directly or indirectly, and any payment disposed of on his instructions, if it would be income had it been paid to him directly.
- Article 32The article provides that compensation amounts received by the taxpayer take the character of what they compensate for in the tax treatment.
- Article 33The article provides that what the taxpayer recovers of an expense, loss or bad debt previously deducted is counted in total income in the year of recovery, and an expense is recovered when the basis for payment falls away.
- Article 34The article sets an estimated base of 5% of the total income of foreign airline, shipping and transport branches in the Kingdom if they do not prove their base, and allows the Minister to extend the estimated method under the Regulations.
- Article 35The article gives the terms of international treaties and agreements to which the Kingdom is a party precedence over the Income Tax Law's provisions in case of conflict, except the anti-avoidance provisions in Article 63.
الفصل الثامن: قواعد الضرائب على شركات الأشخاصArticles 36–42
- Article 36The article imposes tax on the partners in partnerships, not on the partnership, requires the partnership to file an information return and choose its accounting policies, and treats limited partners' shares like capital companies.
- Article 37The article explains how a partner's share of a partnership's income and loss is included in his tax base, when his loss is suspended, and how this relates to the related-party loss rule in Article 63.
- Article 38The article sets the cost basis of a partner's share in a partnership, what increases it from his share of income and debt, and what reduces it from distributions, losses and expenses.
- Article 39The article sets the cost basis of property contributed to a partnership, and adjusts the cost basis of its assets up or down when a partner leaves with a gain or loss on disposing of his share.
- Article 40The article provides that no gain or loss is calculated when a partner transfers an asset to a partnership in exchange for a share, sets the value of his share, and treats any amount paid to him above market price as a distribution.
- Article 41The article treats a transfer of a non-cash asset from a partnership to a partner, even on liquidation of the partner's share, as a disposal by the partnership with a gain or loss, and sets the partner's cost basis and the effect on the partner's share.
- Article 42The article treats a partnership reconstituted by partners joining or leaving, with a change of more than 50% of its membership, as having transferred all its assets to a new partnership in exchange for shares in it.
الفصل التاسع: قواعد الضرائب على شركات الأموالArticles 43–43
الفصل العاشر: ضريبة استثمار الغاز الطبيعيArticles 44–55
- Article 44The article imposes a tax called the natural gas investment tax on anyone engaged in investing in natural gas, its liquids and its condensates within the Kingdom, its exclusive economic zone or its continental shelf.
- Article 45The article defines working in natural gas investment, what is meant by gas transport and what it excludes, and what is meant by gas condensates, for the purposes of the natural gas investment tax.
- Article 46The article defines income from natural gas investment as the gross income from selling the gas, its liquids, condensates and products, and any incidental or non-operating income linked to the main activity.
- Article 47The article sets the base of the natural gas investment tax as the gross income in Article 46 after deducting deductible expenses, and treats royalty and surface rent as deductible.
- Article 48The article ties the rate of the natural gas investment tax to the internal rate of return on the taxpayer's cumulative annual cash flows, under a table that starts at 30% and ends at 85%.
- Article 49The article explains how annual cash flows are calculated by adjusting the natural gas investment tax base, adding back certain items and deducting others.
- Article 50The article applies income tax at 20% under paragraph (b) of Article 7 to the gas investment tax base, and then deducts the income tax paid from the gas investment tax due.
- Article 51The article makes the gas investment tax base separate for each exploration and production contract or agreement with the Government, and separate from the taxpayer's other activities, with a separate return and audited accounts for each.
- Article 52The article subjects the taxpayer to income tax under paragraph (b) of Article 7 on income from processing or fractionating gas in a licensed independent plant, and from transporting it for others in a licensed independent pipeline.
- Article 53The article exempts companies producing oil, or oil and gas together, from the provisions of the natural gas investment tax chapter in respect of their activity in the area of operations or concession defined when the Law took effect.
- Article 54The article provides that paragraph (c) of Article 7, which imposes 85% on those producing oil and hydrocarbons, does not apply to the natural gas investment tax base.
- Article 55The article provides that where the natural gas investment tax chapter has no provision, the provisions of the other articles of the Law apply to the taxpayer subject to this tax.
الفصل الحادي عشر: أحكام عامةArticles 56–59
- Article 56The article makes the Authority responsible for administering, examining, assessing and collecting income tax and imposing its penalties, with a penalty imposed by decision of the Governor or whoever the Authority's board delegates.
- Article 57The article requires every person subject to income tax to register his activity before the end of his first fiscal year, excepts those subject only to final withholding, and imposes a fine of SAR 1,000 to 10,000.
- Article 58The article requires the taxpayer, other than a non-resident without a permanent establishment, to keep books and accounting records in Arabic, and lets the Department reject any expense for which the taxpayer fails, without reasonable cause, to provide documents or evidence.
- Article 59The article requires the Department and its employees to keep taxpayers' information confidential, limits the excepted recipients to six bodies, binds the recipient to confidentiality, and allows disclosure to others with the taxpayer's written consent.
الفصل الثاني عشر: تقديم الإقرارات والربط وإجراءات الاعتراض والاستئنافArticles 60–67
- Article 60The article regulates the tax return: its form and paying the tax with it, its due date within 120 days, who must file, the cessation return, certification by a certified accountant, and a partnership's information return.
- Article 61The article requires persons and government bodies to give the Department tax information and details of their contracts with the private sector within three months, gives it the right of field examination, and makes those who default jointly liable.
- Article 62The article gives the Department the right to correct the tax in a return and to assess where no return is submitted, requires it to notify the taxpayer by a means proving receipt, and permits an additional assessment that the taxpayer may object to.
- Article 63The article gives the Department powers to combat tax avoidance: disregarding transactions with no tax effect, recharacterizing them, estimated assessment, reallocating income among related parties, dealing with their losses, and income splitting.
- Article 64The article defines related persons: a relative, spouse or in-law up to the fourth degree, a partner controlling 50% or more, a beneficiary of endowed funds, and companies under common control.
- Article 65The article sets the period in which the Department may make or amend a tax assessment, five or ten years depending on the case, and the period available to the taxpayer to claim a refund of overpayments.
- Article 66أ - يجوز للمكلف الاعتراض على ربط المصلحة خلال ستين يوما من تسلم خطاب الربط ، ويصبح الربط نهائيا والضريبة واجبة السداد إذا وافق المكلف على…Amended
- Article 67The article establishes the Committee for Resolution of Tax Violations and Disputes and the Appeal Committee, and sets out their jurisdiction and composition, the period for objecting to decisions, and the period after which tax claims are not heard.Amended
الفصل الثالث عشر: تحصيل الضرائبArticles 68–75
- Article 68The article requires a resident and a non-resident's permanent establishment to withhold tax at set rates from amounts paid to a non-resident from a source in the Kingdom, remit it and issue a certificate, and makes them liable if they default.
- Article 69The article requires the taxpayer to pay the tax due under his return within one hundred and twenty days of the end of his tax year.
- Article 70The article requires the taxpayer to pay three advance payments during the tax year, each 25% of the previous year's tax after deducting withheld tax, if the result reaches SAR 500,000.
- Article 71The article gives the Minister power to allow payment of amounts due from the taxpayer in installments where there are sufficient grounds under the Regulations' controls, while the delay fine remains due for the installment period.
- Article 72The article gives a taxpayer who overpaid a refund of the overpayment, with compensation of 1% for each thirty days, starting after thirty days from his claim and running until he receives it.
- Article 73The article lets the Department seize the property of a taxpayer who has not paid, twenty days after notifying him, obliges holders of his property and banks to cooperate, and exempts his trade tools and furniture up to SAR 300,000.
- Article 74The article regulates the Department's sale of seized property through the competent body, the order of payment from the price, and the suspension of sale while the assessment is under administrative or judicial review, except in two cases.
- Article 75The article lets the Department, after seizure is imposed, require those who owe the taxpayer, such as an employer and banks, to pay directly to it, excluding alimony and living expenses, and relieves the person who complies of liability.
الفصل الرابع عشر: الغراماتArticles 76–78
- Article 76The article imposes a fine of 1% of gross revenue, capped at SAR 20,000, for breaching the return provisions, and for late filing a fine of 5% to 25% of the unpaid tax where that is higher.
- Article 77The article imposes a delay fine of 1% of the unpaid tax for each thirty days, and a fine of 25% of the tax difference where untrue information is provided or fraud is committed with intent to evade.
- Article 78The article gives the Department the right to prosecute a certified accountant in court if it is proved that he submitted or certified incorrect statements contrary to generally accepted accounting principles with intent to help the taxpayer evade.
الفصل الخامس عشر: صلاحيات الوزيرArticles 79–79
الفصل السادس عشر: أحكام ختاميةArticles 80–81
- Article 80The article provides that the Income Tax Law is to be published in the Official Gazette and take effect ninety days after the date of its publication.
- Article 81The article sets transitional provisions for the value of assets purchased before the Law took effect, and bars carrying forward operating losses incurred before Council of Ministers Resolution No. 3 of 1421 AH or during a tax exemption period.