Article 34 of the Saudi Income Tax Law
المادة 34 من نظام ضريبة الدخل · الفصل السابع: قواعد إضافية لتحديد الوعاء الضريبي
The article sets an estimated base of 5% of the total income of foreign airline, shipping and transport branches in the Kingdom if they do not prove their base, and allows the Minister to extend the estimated method under the Regulations.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - إذا لم تقدم فروع الخطوط الجوية وشركات الشحن والنقل البري والبحري الأجنبية العاملة في المملكة ما يثبت وعاءها الضريبي وفقا لأحكام هذا النظام ، يحدد وعاؤها الضريبي وفقا لما يأتي :
1 - يعد الوعاء الضريبي لفروع الخطوط الجوية الأجنبية العاملة في المملكة خمسة بالمائة (5%) من إجمالي الدخل المتحقق في المملكة من التذاكر والشحن والبريد وأي دخل آخر ، وعلى تلك الفروع تقديم إقرار يبين إجمالي دخلها في المملكة في المواعيد المحددة نظاما.
2 - يعد الوعاء الضريبي لفروع شركات الشحن والنقل البري والبحري الأجنبية العاملة في المملكة خمسة بالمائة (5%) من إجمالي الدخل المتحقق في المملكة من أجور الشحن أو أي دخل آخر ، وعلى تلك الفروع تقديم إقرار يبين دخلها بالمملكة في المواعيد المحددة نظاما.
ب - للوزير صلاحية السماح لقطاعات أخرى محددة باستخدام الأسلوب التقديري لتحديد وعائها الضريبي وفقا لأسس ومعدلات تحددها اللائحة .
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 34 explained in plain English
This article sets an alternative way of determining the tax base, the estimated method, for a specified category of foreign establishments:
When does it apply? If foreign airline branches and land and sea shipping and transport companies operating in the Kingdom do not provide what proves their tax base in accordance with the provisions of the Law. If they prove their actual base, estimation is not resorted to under the text of this paragraph.
How is the base determined?
- Branches of foreign airlines: the base is 5% of total income earned in the Kingdom from tickets, freight, mail and any other income.
- Branches of foreign land and sea shipping and transport companies: the base is 5% of total income earned in the Kingdom from freight charges or any other income.
In both cases these branches must still file a return showing their income in the Kingdom on the dates set by law. The 5% here is the base on which tax is calculated, not the tax itself.
Extending the method (paragraph b): the Minister (the Minister of Finance under the definitions) has the power to allow other specified sectors to use the estimated method, on bases and rates set by the Regulations; the article does not mention these sectors or rates.
For foreign transport companies that need to determine their position, it is advisable to consult a lawyer specialized in tax and foreign investment.
Practical example
The branch of a foreign airline in Riyadh had total income in the Kingdom from tickets and freight of SAR 40 million and did not provide what proves its actual tax base. Its tax base is considered to be 5% of this income, that is, SAR 2 million, and it must file a return of its total income on the dates set.
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 34 of the Saudi Income Tax Law
What is the estimated tax base for foreign airlines?
5% of total income earned in the Kingdom from tickets, freight, mail and any other income, if they do not provide what proves their tax base.
Is the 5% the tax rate?
No. The 5% is the tax base on which tax is calculated.
Is the branch exempt from filing a return under the estimated method?
No. These branches must file a return showing their income in the Kingdom on the dates set by law.
Can the estimated method be applied to other sectors?
The Minister has the power to allow other specified sectors to use it, on bases and rates set by the Regulations.
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 25
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.
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
- 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
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.