Article 16 of the Saudi Income Tax Law
المادة 16 من نظام ضريبة الدخل · الفصل الخامس: مصاريف تحقيق الدخل
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 وفقا للمادة السابعة عشرة من هذا النظام .
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 16 explained in plain English
This article encourages taxpayers to carry out research and development by allowing its expenses to be deducted from the tax base, but with one condition and two restrictions:
- The condition: the research and development expenses must be connected with earning taxable income.
- First restriction: the expenses of buying land used for research purposes may not be deducted.
- Second restriction: the expenses of buying equipment used for research purposes may not be deducted directly; rather they are depreciated under Article 17.
This means equipment enters the depreciation groups at the rates set in Article 17, including 25% for plants, machinery, devices, software and equipment, so a part of its value is deducted each year instead of all at once. As for land, Article 17 excludes it from depreciation altogether.
This differs from reserves and provisions, which Article 15 bars from deduction; the deduction here is for actual research and development expenses. To classify the expenses of a particular research project, it is advisable to consult a lawyer specialized in tax and commercial matters.
Practical example
A software company in Riyadh spent SAR 300,000 during the year on salaries for a team developing a new product, and bought test devices for SAR 100,000. The salaries may be deducted as research and development expenses, while the devices are depreciated under Article 17.
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 16 of the Saudi Income Tax Law
Are research and development expenses deducted from income tax?
Yes, if they are connected with earning taxable income.
Are laboratory devices bought for research deducted directly?
No. Research equipment is not deducted directly on purchase but is depreciated under Article 17.
May land bought for a research center be deducted?
No. The article bars deducting the expenses of buying land used for research purposes.
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 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 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 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.