Article 4 of the Saudi Income Tax Law

This article sets out when a non-resident has a permanent establishment in the Kingdom, which is important in determining whether a non-resident's activity in the Kingdom is carried on through a permanent establishment.

General rule (paragraph a): a permanent establishment is a permanent place from which a non-resident carries on his activity wholly or partly, including activity he carries on through an agent of his, unless the article provides otherwise.

Cases that count as a permanent establishment (paragraph b):

• Construction sites, assembly facilities and supervisory work connected with them.
• Installations, sites, drilling rigs and ships used in surveying natural resources, and supervisory work connected with them.
• The fixed base from which a non-resident natural person carries on his activity.
• The branch of a non-resident company that is licensed to do business in the Kingdom.

Purposes that do not make a place a permanent establishment (paragraph c) if it is used for them only: storing, displaying or delivering the non-resident's goods, maintaining a stock of them for processing by another person, purchasing solely to gather information, preparatory or auxiliary activities, and preparing contracts for signature relating to loans or the supply of goods or technical services, or any combination of these activities.

The non-resident partner (paragraph d): he is considered to own a permanent establishment in the Kingdom in the form of his share in a resident partnership (which under the definitions means a general partnership, a joint venture, or a simple limited partnership).

Because the line between preparatory activity and core activity requires assessment, it is advisable to consult a lawyer specialized in tax and foreign investment.