Article 43 of the Saudi Income Tax Law
المادة 43 من نظام ضريبة الدخل · الفصل التاسع: قواعد الضرائب على شركات الأموال
The article subjects the general partners' shares in a partnership limited by shares to the rules for partnerships, and bars deduction of a non-Saudi's share of prior losses when ownership or control changes by 50% or more.
Official text (Arabic)
This article has not been amended since the law was issued.
أ - تفرض ضريبة على حصص الشركاء المتضامنين في شركة التوصية بالأسهم كما في شركة الأشخاص ، ومن ثم تحسم حصص الشركاء المتضامنين لتحديد الوعاء الضريبي للشركة ، وتنطبق الأحكام الواردة في هذا النظام عن شركات الأشخاص على حصص الشركاء المتضامنين في شركات التوصية بالأسهم .
ب - إذا حدث تغيير في ملكية شركة الأموال أو في السيطرة عليها تصل نسبته إلى خمسين بالمائة (50%) أو أكثر ، لا يجوز حسم حصة غير السعودي في الخسائر المتكبدة قبل التغيير وفقا للمادة الحادية والعشرين من هذا النظام في السنوات الضريبية التي تلي التغيير.
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 43 explained in plain English
This article contains two provisions concerning capital companies, which under Article 1 are the joint stock company, the limited liability company and the partnership limited by shares.
(a) General partners in a partnership limited by shares:
- Tax is imposed on their shares as in a partnership, that is, on the partner himself.
- Their shares are deducted when determining the company's tax base, so they are not counted within it.
- The provisions of the Law on partnerships apply to them.
(b) Change of ownership or control: If there is a change in the ownership of a capital company or in its control amounting to 50% or more, the non-Saudi's share in losses incurred before the change, being the losses carried forward under Article 21, may not be deducted in the tax years following the change.
Note that the provision concerns the non-Saudi's share specifically, as stated in the text, and requires the change to reach 50% or more. This threshold differs from the threshold for reconstitution of a partnership in Article 42, which requires a change of more than 50%.
Anyone buying or selling shares in a company with prior losses may consult a lawyer specializing in tax and zakat to assess the effect of the transaction on deductible losses.
Practical example
A limited liability company in Riyadh is owned by a foreign partner and has accumulated losses from previous years. Another investor bought 60% of its shares. After this change, the company may not deduct the non-Saudi's share of the losses incurred before the sale in the following tax years.
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 43 of the Saudi Income Tax Law
How is the tax treatment of the general partners' shares in a partnership limited by shares determined?
Tax is imposed on them as in a partnership, they are deducted from the company's tax base, and the provisions on partnerships apply to them.
Do carried-forward losses lapse if the company is sold?
If the ownership of a capital company or its control changes by 50% or more, the non-Saudi's share in losses incurred before the change may not be deducted in the following years.
Does the bar on deducting losses cover the Saudi partner's share?
The text speaks only of the non-Saudi's share in the losses.
Articles this article refers to
More articles on Tax on Partners in Companies
- Article 36
The article imposes tax on the partners in partnerships, not on the partnership, requires the partnership to file an information return and choose its accounting policies, and treats limited partners' shares like capital companies.
أ - تفرض الضريبة على الشركاء في شركات الأشخاص وليس على الشركة ذاتها ، إلا أنه يجب على الشركة تقديم إقرار ضريبي لغرض المعلومات يوضح فيه مقدار الدخل والربح والخسا
- Article 37
The article explains how a partner's share of a partnership's income and loss is included in his tax base, when his loss is suspended, and how this relates to the related-party loss rule in Article 63.
أ - لتحديد الوعاء الضريبي للشريك ، يحتفظ الدخل والحسومات والخسائر والدين الناشئ أو المستحق على شركة الأشخاص كل بصفته من ناحية المصدر الجغرافي ونوع الدخل والمكاس
- Article 38
The article sets the cost basis of a partner's share in a partnership, what increases it from his share of income and debt, and what reduces it from distributions, losses and expenses.
أ - يحدد أساس التكلفة لحصة الشريك في شركة الأشخاص بالمبلغ الذي دفعه الشريك مقابل حصته إضافة إلى أساس تكلفة الممتلكات التي قدمها للشركة . ب - يزداد أساس التكلفة
- Article 39
The article sets the cost basis of property contributed to a partnership, and adjusts the cost basis of its assets up or down when a partner leaves with a gain or loss on disposing of his share.
أ - أساس التكلفة الأولية للممتلكات المقدمة لشركة الأشخاص تساوي أساس التكلفة للشريك الذي قدمها . ب - إذا خرج شريك من شركة أشخاص واستلم توزيعا يجعله يحقق ربحا من
- Article 40
The article provides that no gain or loss is calculated when a partner transfers an asset to a partnership in exchange for a share, sets the value of his share, and treats any amount paid to him above market price as a distribution.
أ - لا يحتسب ربح أو خسارة عن نقل شريك ملكية أصل له إلى شركة أشخاص مقابل تملكه حصة في تلك الشركة . ب - يعد الشريك مالكا لحصة في شركة الأشخاص مساوية للفرق بين قيم
- Article 41
The article treats a transfer of a non-cash asset from a partnership to a partner, even on liquidation of the partner's share, as a disposal by the partnership with a gain or loss, and sets the partner's cost basis and the effect on the partner's share.
أ - يعامل نقل ملكية أصل غير نقدي من شركة أشخاص إلى شريك ، بما في ذلك حالة تصفية حصة الشريك ، على أنه تصرف بالأصل من قبل الشركة مع إقرار بالربح أو الخسارة في تار
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.