TaxSavvySA

Saudi partner changes tax position

If I add a Saudi partner with 30 percent, what changes for tax?

The situation

In a mixed company the Saudi and GCC share pays Zakat and the foreign share pays 20 percent income tax on adjusted profit.

The law

  • Income Tax Law and Zakat Regulation, mixed ownership: Non-Saudi, non-GCC share pays 20 percent income tax; Saudi and GCC share pays Zakat
  • Income Tax Law (Royal Decree M/1 of 1425H), corporate income tax: 20 percent on net adjusted profits of the non-Saudi, non-GCC share

What it means for you

Example: adjusted profit SAR 500,000 with 70 percent foreign: income tax 20 percent x 350,000 = SAR 70,000. The Saudi 30 percent goes into a Zakat base computed from equity and other items, not profit alone. You will file one return covering both. Audited statements are needed with the return.

What to do

  1. Record the shareholding by nationality in the articles.
  2. Register both Zakat and income tax on ZATCA.
  3. Book an auditor for year one.

We can do this for youSet up a foreign-owned company in Saudi Arabia: MISA investor registration and commercial registration: SAR 9,500

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