Article 54 of the Saudi Income Tax Law
المادة 54 من نظام ضريبة الدخل · الفصل العاشر: ضريبة استثمار الغاز الطبيعي
The article provides that paragraph (c) of Article 7, which imposes 85% on those producing oil and hydrocarbons, does not apply to the natural gas investment tax base.
Official text (Arabic)
This article has not been amended since the law was issued.
لا تسري أحكام الفقرة (ج) من المادة السابعة من هذا النظام على وعاء ضريبة استثمار الغاز الطبيعي لأي مكلف خاضع لضريبة استثمار الغاز الطبيعي .
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 54 explained in plain English
This article prevents the 85% rate from being applied to gas profits subject to the natural gas investment tax.
What is paragraph (c) of Article 7? It provides that the tax rate on the tax base of a taxpayer working in producing oil and hydrocarbons is eighty-five percent (85%).
The rule in this article: This paragraph does not apply to the natural gas investment tax base of any taxpayer subject to the natural gas investment tax. So even if gas and its condensates are hydrocarbons, the gas investment tax base is not treated at the oil rate.
How, then, is the gas base treated? Under the texts presented:
- Paragraph (b) of Article 7 provides that the tax rate on the base of a taxpayer working in natural gas investment is 20%.
- Paragraph (e) of Article 7 provides that a person working in both fields pays the sum of the tax on his two bases under paragraphs (b) and (c), meaning each field has its own base.
This article is preceded by Article 53, which exempts oil-producing companies from the provisions of this chapter in their concession areas, and followed by Article 55, which applies the other provisions of the Law to a taxpayer subject to the gas investment tax where the chapter has no provision.
Anyone working in both oil and gas who needs to separate the bases precisely may consult a lawyer specializing in tax and zakat.
Practical example
A company works in oil production and in natural gas investment at the same time. The 85% rate applies to its base from producing oil and hydrocarbons, but it does not apply to the natural gas investment tax base, and its tax is the sum of the tax due on the two bases.
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 54 of the Saudi Income Tax Law
Does the 85% rate apply to natural gas profits?
No. Paragraph (c) of Article 7, which sets the 85% rate, does not apply to the natural gas investment tax base of any taxpayer subject to it.
What is the income tax rate for a taxpayer working in gas investment?
Paragraph (b) of Article 7 provides that it is 20%.
How is the tax of someone working in both oil and gas calculated?
Under paragraph (e) of Article 7, his tax is the sum of the tax due on his two bases under paragraphs (b) and (c).
Articles this article refers to
More articles on Natural Gas Investment Tax
- Article 44
The article imposes a tax called the natural gas investment tax on anyone engaged in investing in natural gas, its liquids and its condensates within the Kingdom, its exclusive economic zone or its continental shelf.
تفرض على كل شخص يعمل في مجال استثمار الغاز الطبيعي وسوائله ومكثفات الغاز داخل المملكة أو منطقتها الاقتصادية الخالصة أو جرفها القاري ضريبة تسمى ضريبة استثمار الغ
- Article 45
The article defines working in natural gas investment, what is meant by gas transport and what it excludes, and what is meant by gas condensates, for the purposes of the natural gas investment tax.
أ - يقصد بالعمل في مجال استثمار الغاز الطبيعي أعمال التنقيب عن الغاز الطبيعي وإنتاجه وتجميعه وتنقيته ومعالجته ، وتجزئة سوائل الغاز الطبيعي، وإنتاج وتجميع مكثفات
- Article 46
The article defines income from natural gas investment as the gross income from selling the gas, its liquids, condensates and products, and any incidental or non-operating income linked to the main activity.
الدخل الناتج من العمل في مجال استثمار الغاز الطبيعي ، هو إجمالي الدخل المتحقق من بيع أو تبادل أو تحويل الغاز الطبيعي وسوائله ومكثفات الغاز بما في ذلك الكبريت وا
- Article 47
The article sets the base of the natural gas investment tax as the gross income in Article 46 after deducting deductible expenses, and treats royalty and surface rent as deductible.
وعاء ضريبة استثمار الغاز الطبيعي هو إجمالي الدخل المشار إليه في المادة السادسة والأربعين من هذا النظام مخصوما منه المصاريف جائزة الحسم بموجب هذا النظام ، وتعتبر
- Article 48
The article ties the rate of the natural gas investment tax to the internal rate of return on the taxpayer's cumulative annual cash flows, under a table that starts at 30% and ends at 85%.
يحدد سعر ضريبة استثمار الغاز الطبيعي عن أية سنة ضريبية وفقا لمعدل العائد الداخلي للتدفقات النقدية السنوية التراكمية للمكلف المستمدة من نشاط استثمار الغاز الطبيع
- Article 49
The article explains how annual cash flows are calculated by adjusting the natural gas investment tax base, adding back certain items and deducting others.
يتم حساب التدفقات النقدية السنوية عن طريق تعديل وعاء ضريبة استثمار الغاز الطبيعي كما يلي : أ - إعادة إدراج الخسائر التشغيلية المرحلة من السنوات السابقة . ب - إع
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.