Article 19 of the Saudi Income Tax Law
المادة 19 من نظام ضريبة الدخل · الفصل الخامس: مصاريف تحقيق الدخل
The 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.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - تحسم مصاريف المسح الجيولوجي والأعمال التمهيدية لاستخراج الموارد الطبيعية على شكل مصاريف إطفاء ، وبمعدل الاستهلاك المحدد في الفقرة (ب) من المادة السابعة عشرة من هذا النظام ، حيث تشكل هذه المصاريف مجموعة مستقلة .
ب - تنطبق هذه المادة أيضا على مصاريف الأصول غير الملموسة ، والتي يتحملها المكلف في شراء حقوق المسح الجيولوجي ومعالجة واستغلال الموارد الطبيعية .
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 19 explained in plain English
This article deals with how to deduct the expenses of geological surveying and preliminary work for extracting natural resources, which mining and natural resources companies bear before production begins.
- Method of deduction: these expenses are not deducted all at once but as amortization expenses, that is, over a number of years.
- The rate: at the depreciation rate set in paragraph (b) of Article 17, which for the expenses of geological surveying, drilling, exploration and preliminary work for extracting natural resources and developing their fields is 20%.
- A separate group: these expenses form a group separate from the other asset groups, so they are not mixed with buildings or machinery.
- Intangible assets (paragraph b): the same rule applies to expenses of intangible assets the taxpayer incurs in buying the rights to geological surveying and to processing and exploiting natural resources.
The article thus treats exploration expenses and the expenses of buying its rights in one way, amortized gradually within their own group. The article does not state how the group's remaining value is calculated but refers to the depreciation rate in paragraph (b) of Article 17.
For mining companies that need precise application to their projects, it is advisable to consult a lawyer specialized in tax and commercial matters.
Practical example
A foreign mining company with a permanent establishment in the Kingdom spent SAR 2,000,000 on the geological survey of a mineral site and SAR 500,000 to buy the right to exploit it. These amounts are deducted as amortization at 20% within a separate group, not all at once.
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 19 of the Saudi Income Tax Law
Are drilling and exploration expenses deducted all at once?
No. They are deducted as amortization expenses at the depreciation rate set in paragraph (b) of Article 17.
What is the amortization rate for geological survey expenses?
20%, which is the rate paragraph (b) of Article 17 sets for these expenses.
Does the rule cover buying exploitation rights?
Yes. It applies to expenses of intangible assets in buying the rights to geological surveying and to processing and exploiting natural resources.
Articles this article refers to
More articles on Depreciation of Assets for Tax
- 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 17
The 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.
أ - باستثناء الأرض يجوز حسم الاستهلاك عن أصول المكلف ذات الطبيعة المستهلكة الملموسة وغير الملموسة التي تنقص قيمتها ، بسبب الاستعمال أو التلف أو التقادم ، وتستخد
- Article 18
The 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.
أ - يجوز حسم المصاريف المتكبدة في كل مجموعة عن الإصلاحات أو التحسينات التي أجراها المكلف على الأصول المستهلكة الواقعة في تلك المجموعة . ب - لا تزيد قيمة المصاري
- Article 79
The article sets out the Minister of Finance's powers to issue the Regulations and instructions, amend depreciation groups and rates, waive tax debt and fines where collection is impossible, and award bonuses to outstanding employees.
للوزير الصلاحيات الآتية : أ - إصدار اللائحة التنفيذية لهذا النظام. ب - إصدار التعليمات واتخاذ الإجراءات التي يراها ضرورية لوضع هذا النظام موضع التنفيذ . ج - تعد
- Article 81
The 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.
أ - في حالة شراء أصل في سنة ضريبية سابقة على دخول هذا النظام حيز التنفيذ ، فإن القيمة التي تضاف إلى المجموعة الملائمة هي تكلفة الأصل ناقصا أي قسط استهلاك حصل عل
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.