Article 25 of the Saudi Income Tax Law
المادة 25 من نظام ضريبة الدخل · الفصل السادس: قواعد المحاسبة الضريبية
The 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.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - يدون المكلف الذي يستخدم مبدأ الاستحقاق الدخل والمصاريف عند استحقاقها .
ب - يصبح المبلغ واجب الدفع إلى المكلف إذا حق للمكلف استلامه حتى لو تأجل التسديد أو تم على أقساط .
ج - يصبح المبلغ واجب الدفع من قبل المكلف عندما تحدث جميع الوقائع التي تؤكد المديونية .
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 25 explained in plain English
This article explains the accrual basis in recording income and expenses for tax purposes:
- The rule (paragraph a): income and expenses are recorded when they fall due, not when they are collected or paid.
- When income falls due (paragraph b): an amount becomes payable to the taxpayer if he becomes entitled to receive it, even if payment is deferred or made in installments. A credit or installment sale is recorded as income when the taxpayer's right to the amount arises.
- When an expense falls due (paragraph c): an amount becomes payable by the taxpayer when all the events that establish the liability have occurred; it is not enough to expect the obligation, but the events that prove it must be complete.
This is unlike the cash basis in Article 24, under which income is recorded when it is received or ready to be received and expenses when they are paid.
This basis is linked to other provisions of the Law; Article 26 provides that a person using the accrual basis calculates the income and expenses of long-term contracts on the basis of the proportion of work completed during the year. To apply the basis to your establishment's transactions, it is advisable to consult a lawyer specialized in tax and commercial matters.
Practical example
A car showroom in Jeddah using the accrual basis sold a car in November at a price payable in 24 installments. The price is recorded as income when the showroom becomes entitled to receive it, even if payment is deferred or made in installments.
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 25 of the Saudi Income Tax Law
When is income recorded on the accrual basis?
When it falls due, that is, if the taxpayer becomes entitled to receive it even if payment is deferred or made in installments.
When is an expense considered due?
When all the events that establish the liability have occurred.
What is the difference between the accrual basis and the cash basis?
The accrual basis records income and expenses when they fall due, while the cash basis records income when it is received or ready to be received and expenses when they are paid.
More articles on Tax Accounting Rules
- Article 22
The 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.
أ - السنة الضريبية هي السنة المالية للدولة . ب - يجوز للمكلف استخدام فترة اثني عشر شهرا مختلفة عما ورد في الفقرة (أ) من هذه المادة كسنة ضريبية وفقا للضوابط التي
- Article 23
The 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.
أ - يجب أن تبين طريقة المحاسبة التي يتبعها المكلف دخله بوضوح . ب - يحدد إجمالي الدخل والمصاريف للشركة المقيمة ولأي مكلف يحتفظ أو ملزم نظاما بالاحتفاظ بالدفاتر ا
- Article 24
The 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.
يدون المكلف الذي يستخدم الأساس النقدي في دفاتره وسجلاته الدخل المستلم عند استلامه أو عندما يكون جاهزا للاستلام ، والمصاريف المسددة عند دفعها.
- Article 26
The 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.
أ - يحتسب الدخل والمصاريف المتعلقة بعقد طويل الأجل للمكلف الذي يستخدم مبدأ الاستحقاق على أساس نسبة العمل المنجز خلال السنة الضريبية . ب - تحدد نسبة العمل المنجز
- Article 27
The 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.
أ - على المكلف الذي يحتفظ بمخزون ، فتح سجلات جرد له والاحتفاظ بتلك السجلات. ب - تحسم تكلفة البضاعة المباعة خلال السنة الضريبية . ج - تتحدد تكلفة البضاعة المباعة
- Article 28
The article provides that income and expenses relating to jointly owned property are allocated among the partners in accordance with their ownership shares in it.
يوزع الدخل أو المصاريف المتعلقة بممتلكات مشتركة على الشركاء وفقا لحصص الملكية فيها.
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.