Article 12 of the Saudi Income Tax Law
المادة 12 من نظام ضريبة الدخل · الفصل الخامس: مصاريف تحقيق الدخل
The 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.
Official text (Arabic)
This article has not been amended since the law was issued.
جميع المصاريف العادية والضرورية لتحقيق الدخل الخاضع للضريبة ، سواء كانت مسددة أو مستحقة ، والمتكبدة خلال السنة الضريبية هي مصاريف جائزة الحسم عند احتساب الوعاء الضريبي ، باستثناء أي مصاريف ذات طبيعة رأسمالية ، والمصاريف الأخرى غير جائزة الحسم بمقتضى المادة الثالثة عشرة من هذا النظام ، والأحكام الأخرى في هذا الفصل .
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 12 explained in plain English
This article sets the general rule for deducting expenses when calculating the tax base. An expense is deductible if it has the following descriptions together:
- It is ordinary and necessary for earning taxable income.
- It is incurred during the tax year.
- It may be paid or accrued; it need not have actually been paid so long as it fell due during the year.
The article then excludes from deduction:
- Expenses of a capital nature, such as the cost of buying assets.
- Expenses that may not be deducted under Article 13, including: expenses not connected with earning taxable income, amounts paid to a shareholder or partner or their relatives in the specified cases, entertainment expenses, a natural person's personal consumption expenses, income tax paid in the Kingdom or abroad, fines and financial penalties (except those paid for breach of contractual terms), and bribes.
- What is prohibited by the other provisions in this chapter.
Alongside this rule, Article 11 allows deducting donations to public bodies and licensed charitable associations under its conditions. To assess a particular expense, it is advisable to consult a lawyer specialized in tax and commercial matters.
Practical example
An engineering office owned by a foreign resident in Riyadh paid during the year the office rent and employees' salaries, and an electricity bill for the last month fell due that it has not yet paid. These are all ordinary and necessary expenses of earning income, so they may be deducted, including the accrued bill. Buying a new car for the office, however, is a capital expense that is not deducted under this article.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
How we write and review contentCommercial & Corporate Law lawyers: ask a specialist about your case
Describe your situation briefly and we'll suggest a lawyer who specialises in this law
Commercial & Corporate Law lawyers
Lawyers who handle this kind of case
Ibrahim Al Salem Law Firm
Active contributor
Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Frequently asked questions about Article 12 of the Saudi Income Tax Law
Which expenses may be deducted for income tax?
All ordinary and necessary expenses of earning taxable income, paid or accrued and incurred during the tax year, except capital expenses and what Article 13 and the provisions of this chapter prohibit.
May an accrued expense that has not yet been paid be deducted?
Yes. The article provides that expenses paid or accrued and incurred during the tax year are deductible.
Is the cost of buying equipment deducted at once?
No. Expenses of a capital nature are excluded from deduction under this article.
Articles this article refers to
More articles on Deductible Expenses and Losses
- Article 11
The 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.
يجوز لتحديد الوعاء الضريبي لكل مكلف حسم التبرعات المدفوعة خلال السنة الضريبية إلى هيئات عامة ، أو جمعيات خيرية مرخص لها بالمملكة لا تهدف إلى الربح، ويجوز لها تل
- Article 13
The 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.
لا يجوز حسم المصاريف التالية : أ - المصاريف غير المرتبطة بتحقيق الدخل الخاضع للضريبة . ب - أي مبالغ مدفوعة أو مزايا مقدمة للمساهم أو الشريك أو لأي قريب لهما إذا
- Article 14
The 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.
أ - يجوز للمكلف حسم الديون المعدومة الناتجة عن بيع بضاعة أو خدمات سبق التصريح بها إيرادا في دخل المكلف الخاضع للضريبة . ب - يجوز حسم الدين المعدوم عند شطبه من د
- Article 15
The 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.
لا يجوز حسم أي احتياطيات أو مخصصات خلاف مخصصات الديون المشكوك في تحصيلها في البنوك ، وتحدد اللائحة قواعد وضوابط تحديد هذه المخصصات .
- Article 16
The 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.
يجوز حسم مصاريف البحوث والتطوير المرتبطة بتحقيق الدخل الخاضع للضريبة ، ولا يجوز حسم مصاريف شراء الأرض أو المعدات التي تستخدم في أغراض البحث حيث تستهلك المعدات و
- Article 20
The 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.
أ - يجوز حسم مساهمات صاحب العمل لصالح المستخدم في صندوق تقاعد نظامي مؤسس وفقا لأنظمة المملكة. ب - لا يتجاوز الحسم المسموح به بمقتضى الفقرة ( أ ) من هذه المادة ع
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.