Article 35 of the Saudi Income Tax Law
المادة 35 من نظام ضريبة الدخل · الفصل السابع: قواعد إضافية لتحديد الوعاء الضريبي
The article gives the terms of international treaties and agreements to which the Kingdom is a party precedence over the Income Tax Law's provisions in case of conflict, except the anti-avoidance provisions in Article 63.
Official text (Arabic)
This article has not been amended since the law was issued.
عند تعارض شروط معاهدة أو اتفاقية دولية تكون المملكة طرفا فيها مع مواد وأحكام هذا النظام ، تسري شروط المعاهدة أو الاتفاقية الدولية باستثناء أحكام المادة الثالثة والستين من هذا النظام المتعلقة بإجراءات مكافحة التجنب الضريبي .
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 35 explained in plain English
This article sets a rule of precedence when a provision of the Income Tax Law differs from a term of an international treaty or agreement to which the Kingdom is a party.
The general rule: if there is a conflict between the terms of the international treaty or agreement and the articles and provisions of the Law, the terms of the treaty or agreement apply. This means that a taxpayer covered by an international agreement is subject to what that agreement provides on the point of conflict instead of the Law's provision.
The exception: the agreement does not prevail over the provisions of Article 63 on anti-tax-avoidance measures, so those provisions remain in force even if there is an agreement. Examples of what Article 63 gives the Authority:
- Disregarding any transaction that has no tax effect, and recharacterizing transactions whose form does not reflect their substance.
- Assessing by the estimated method if the taxpayer did not file his return on time or did not keep accurate accounts and books.
- Reallocating revenue and expenses among related parties, and dealing with the splitting of income.
Conditions for applying the rule: the Kingdom must be a party to the treaty or agreement, and there must be an actual conflict between its terms and the provisions of the Law. If there is no conflict, the Law is applied as it is.
The article is in Chapter Seven on additional rules for determining the tax base. Because determining whether a conflict exists and the scope of the agreement is a technical matter that varies with each agreement, anyone dealing with cross-border income would do well to consult a lawyer specialized in tax and zakat.
Practical example
A foreign company provides services to a customer in Riyadh, and its country is linked with the Kingdom by an international agreement containing a tax provision that differs from a provision in the Income Tax Law. Here the agreement's provision applies on the point of conflict. But if the company arranged a sham transaction whose form does not reflect its substance in order to reduce tax, the Authority may recharacterize it under Article 63, and the agreement does not protect it from that.
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 35 of the Saudi Income Tax Law
Do international tax agreements prevail over the Saudi Income Tax Law?
Yes. In case of conflict, the terms of the international treaty or agreement to which the Kingdom is a party apply, except the provisions of Article 63 on anti-tax-avoidance.
Does an international agreement prevent the Authority from applying anti-tax-avoidance measures?
No. The article expressly excepts the provisions of Article 63, so the anti-tax-avoidance measures remain applicable even if there is an agreement.
When do the agreement's terms not apply instead of the Law?
When there is no conflict between its terms and the provisions of the Law, when the matter concerns the provisions of Article 63, or if the Kingdom is not a party to the agreement.
Articles this article refers to
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.