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Saudi Arabia’s modern tax regime encompassing VAT, Corporate Income Tax (CIT), Zakat, and Withholding Tax (WHT) is built for transparency and investor-friendly outcomes, aligning with Vision 2030’s growth goals. Learn more on Business Taxes in Saudi Arabia.
1. VAT (Value Added Tax) – 15% standard rate
- Implemented in 2020, now set at 15% on most goods & services
- Mandatory registration for businesses with annual turnover exceeding SAR 375,000
- Exemptions and zero‑rating apply for healthcare, education, exports, and SEZ transactions
- E‑invoicing via ZATCA’s Fatoora is mandatory and enforced alongside new VAT grouping rules effective April 2025
Why it matters: Proper VAT compliance protects businesses from fines, which can reach 25% of due tax, plus additional penalties for late filings.
2. Corporate Income Tax (CIT) – 20% on net profits
- Flat 20% CIT applies to non‑Saudi entities on net adjusted profits
- Income from oil & hydrocarbons is taxed at 50–85%, per industry regulations
- Natural gas enterprises follow general CIT rules since 2018 .
- Deadlines & penalties: returns due within 120 days of fiscal year-end; late payments incur 1% monthly fines
Why it matters: For non-Saudi investors, understanding CIT is essential especially for structuring profit repatriation and managing cash flow.
3. Zakat – 2.5% religious levy
- Only Saudi/GCC-owned businesses pay Zakat: 2.5% of Zakat base (equity, retained earnings, inventory, receivables)
- Mixed-ownership firms pay Zakat on Saudi/GCC share and CIT on the foreign portion
- Must file and pay annually within 120 days of fiscal year-end
Why it matters: Proper tax structure prevents overlapping liabilities and optimizes owners’ tax contributions.
4. Withholding Tax (WHT) – 5–20%
- Applies to payments to non-residents:
- Dividends, interest, rent → 5%
- Royalties, technical services, consulting → 15–20%
- Due within 10 days monthly; annual return within 120 days of fiscal year-end .
- Penalties include 1% monthly late filings and potential 25% fines for evasion
Why it matters: Accurate WHT ensures compliance and avoids double taxation under treaties.
5. Incentives & Reliefs
- Regional HQ (RHQ): 0% CIT & WHT with substance conditions
- Special Economic Zones (SEZs) (e.g., NEOM, KAEC): tax breaks include 5% CIT, 0% WHT, VAT exemptions
- Amnesty window: penalties waived until June 30, 2025 for late filings under VAT, CIT, WHT & excise tax
6. Filing & Compliance Calendar
| Tax Type | Filing Deadline | Payment Frequency |
|---|---|---|
| VAT | Quarterly (or annual) | Monthly remittances |
| CIT/Zakat | 120 days post-year-end | Annual (plus advance CIT) |
| WHT | Monthly return/payment | Annual summary |
Mandatory e-invoicing and digital records via Fatoora are critical for all registered entities
Why J K?
At J K Management Consultancies, we specialize in navigating the intricacies of Saudi business taxes. We’ll help:
- Structure your entity for optimal Zakat/CIT outcomes
- Register and manage VAT compliance & Fatoora e-invoicing
- Handle WHT filings and relief through DTAs
- Evaluate eligibility for RHQ or SEZ incentives
- Leverage ongoing amnesty to minimize liabilities
Book a free consultation with us to secure your tax strategy and stay ahead in 2025.
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