Article 5 of the Saudi Income Tax Law

This article answers the question: when is income from a source in the Kingdom? It is a basic question because Article 6 builds the tax base on taxable income from sources in the Kingdom.

Income is from a source in the Kingdom in any of the following cases:

1. If it arises from an activity carried out in the Kingdom.
2. If it arises from immovable property in the Kingdom, including profits on disposing of an interest in it, or of shares or stock in a company whose property consists mainly (directly or indirectly) of interests in immovable property in the Kingdom.
3. If it arises from disposing of shares or a partnership interest in a resident company.
4. If it arises from leasing movable property used in the Kingdom.
5. If it arises from selling industrial or intellectual property in the Kingdom or licensing its use.
6. Dividends or management and director fees paid by a resident company.
7. Amounts for services paid by a resident company to its head office or to a company related to it.
8. Amounts paid by a resident in return for services performed wholly or partly in the Kingdom.
9. Amounts in return for exploiting a natural resource in the Kingdom.
10. Income attributable to a non-resident's permanent establishment in the Kingdom, including sales of goods of the same or a similar kind to those he sells through it, and services or activity of the same nature as its activity or similar to it.

Paragraph (b) provides that the place of payment of income is not taken into account in determining its source; payment into an account abroad does not change its source. Paragraph (c) provides that an amount paid by a permanent establishment in the Kingdom to a non-resident is treated as if paid by a resident company. To apply these cases to a particular contract, it is advisable to consult a lawyer specialized in tax and foreign investment.