Article 15 of the Saudi Income Tax Law
المادة 15 من نظام ضريبة الدخل · الفصل الخامس: مصاريف تحقيق الدخل
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.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز حسم أي احتياطيات أو مخصصات خلاف مخصصات الديون المشكوك في تحصيلها في البنوك ، وتحدد اللائحة قواعد وضوابط تحديد هذه المخصصات .
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 15 explained in plain English
This article sets a clear rule: no reserves or provisions may be deducted when calculating the tax base.
Reserves and provisions are amounts an establishment sets aside from its profits in anticipation of potential obligations or losses that have not yet occurred. Because they are estimates and not realized, the Law does not accept reducing the tax base by them.
The only exception the article mentions is provisions for doubtful debts in banks; these alone may be deducted, in accordance with rules and controls set by the Implementing Regulations. The article does not state these rules, so they are found in the Regulations.
It follows that a non-bank establishment cannot, under this article's text, deduct a provision for doubtful debts; what is open to it is to deduct the debt when it becomes actually bad under the conditions of Article 14: that it arose from a sale of goods or services previously declared as revenue, and that it is written off the books with suitable evidence that collection is impossible under the Regulations.
To apply this provision to particular financial statements, it is advisable to consult a lawyer specialized in banking and tax.
Practical example
A trading company in Jeddah set up a provision of SAR 200,000 for customer debts it fears will not be paid. It may not deduct this provision from the tax base because it is not a bank, and it can deduct the debt if it becomes bad under the conditions of Article 14.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 15 of the Saudi Income Tax Law
Are provisions deducted from income tax?
No. No reserves or provisions may be deducted, except provisions for doubtful debts in banks.
Who may deduct a provision for doubtful debts?
Only banks, according to the article's text, in accordance with rules and controls set by the Regulations.
What is the alternative for non-banks?
The debt may be deducted when it becomes bad under the conditions of Article 14.
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 12
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.
جميع المصاريف العادية والضرورية لتحقيق الدخل الخاضع للضريبة ، سواء كانت مسددة أو مستحقة ، والمتكبدة خلال السنة الضريبية هي مصاريف جائزة الحسم عند احتساب الوعاء
- 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 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.