TAX CONSULTANCY
SERVICES IN
SAUDI ARABIA
We offer a full suite of tax services that can address the challenges faced by organistations following the introduction of new tax regulations across the GCC. We ensure that businesses remain in line with the taxation requirements within the UAE, KSA and the wider GCC region.
We have extensive experience in advising and assisting companies from public corporations to family-owned entities, including a full scope of tax structuring, direct and indirect tax capabilities across the GCC.
Our tax experts are all trained from “Big 4” practices and are able to provide our clients with an integrated range of services. Combining our cross-border transaction experience and local tax knowledge, we can provide our clients with innovative, reliable and comprehensive tax services.
With our international reach long-standing relationships with correspondent firms, we have the ability to offer tax advice worldwide.
TAX TYPE & RATES PER COUNTRY WITHIN THE GCC
| UAE | KSA | Bahrain | Oman | Qatar | Kuwait | |
|---|---|---|---|---|---|---|
| Corporate tax | 9% (note 1) | 20% (note 2) | 15% | 10% | 15% | |
| Capital gains | 20% | 15% | 10% | 15% | ||
| Withholding tax | 5-20% | 10% | 5% | Note 3 | ||
| Transfer pricing | (note 4) | |||||
| Thin capitalisation | ||||||
| Country-by-country reporting | Expected | |||||
| Economic substance regulations | ||||||
| VAT | 5% | 15% | 10% | 5% | Expected | Expected |
| Customs duties | 5% | 5% | 5% | 5% | 5% | 5% |
| Excise tax | 50-100% | 50-100% | 50-100% | 50-100% | 50-100% | Expected |
| Social Security Contributions | ||||||
| Real estate tax | 5% |
- Controlled foreign company rules
- General anti-avoidance rules (GAAR)
- Personal income tax
- Inheritance tax
- Transfer tax
- Stamp duty
Note:
- With effect from 1 June 2023, Corporate Tax at a standard tax rate of 9% was applied to all mainland business and commercial activities on taxable profits above AED 375,000.
- Zakat at 2.5% is levied on the higher of adjusted net profits or adjusted net asset value attributable to the company’s Saudi or GCC shareholders.
- Payments to foreign suppliers/service providers are subject to 5% retention, which tax is released once the foreign recipient produces a Tax Clearance Certificate from the Kuwait Tax Authorities.
- Transactions between related parties must be valued at arm’s length. There is no specific guidance on acceptable methods for determining an arm’s-length price.
WHAT IS ZAKAT IN
SAUDI ARABIA?
Zakat tax is a form of direct tax calculated, collected, and distributed in accordance with Islamic laws. According to Islamic principles, “Zakat is the third pillar of the Islam religion and the most significant financial worship.” The state is responsible for administering and overseeing the collection of Zakat on declared funds and distributing it to those in need.
The key concepts of Zakat levying regulation include:
Zakat Payers:
- Saudi residents engaged in activities under a license in the Kingdom.
- Sole proprietorships owned by Saudis and established in the Kingdom.
- Companies owned by Saudis and established in the Kingdom, including the share of the Saudi partner in foreign companies.
- Financing funds licensed by the Capital Market Authority.
- State-owned companies and companies owned by the Public Investment Fund in accordance with relevant ministerial decisions.
- Non-Saudi shareholders’ stakes in resident companies listed on the Saudi financial market, excluding the shares of non-Saudi founders as per the articles of incorporation or relevant regulatory documents.
IS TAX MANAGEMENT CONSULTANCY ONLY RELEVANT FOR LARGE CORPORATIONS OR CAN SMALL BUSINESSES BENEFIT AS WELL?
Tax Management Consultancy for Businesses of All Sizes
Tax management consultancy services are relevant and beneficial for businesses of all sizes, including small businesses. While large corporations may have more complex tax structures and resources, small businesses can still derive significant value from professional tax consultancy.
Small businesses often face distinct tax challenges, such as navigating deductions, compliance issues, and tax planning strategies tailored to their specific circumstances. Tax consultants offer expertise in optimizing tax positions, identifying potential savings, ensuring compliance with tax laws, and providing strategic advice on managing tax liabilities.
Moreover, tax consultants assist small businesses in understanding the implications of tax law changes, maximizing available tax incentives and credits, structuring their businesses efficiently from a tax perspective, and planning for tax obligations throughout the fiscal year.
In summary, tax management consultancy provides valuable insights and expertise to help minimize tax liabilities, maximize savings, and ensure compliance with tax regulations for businesses of all sizes, including small enterprises.
HOW IS ZAKAT CALCULATED IN KSA / SAUDI ARABIA?
Calculation of Zakat Tax:
The Zakat rate is two and a half percent (2.5%) of the Zakat base for the Hijri year.
WHAT IS THE ZAKAT BASE FOR THE CALCULATION OF ZAKAT TAX?
The Zakat base is determined by the book of accounts and financial/accounting records maintained by the Zakat Payer, in which all commercial transactions are recorded. The Authority uses the indirect method (sources of funds method) to determine the Zakat base. This method relies on two basic procedures:
- Add: External sources equivalent to deductible assets plus internal sources of funds. This includes capital, advance revenue and prepayment, long-term obligations, first-year revenue, retained earnings, etc.
- Deduct: The value of non-Zakatable assets and the value of Zakatable assets. This includes net fixed assets, capital work in progress, intangible assets, Zakat investments, etc.
Zakat base = Add – Deduct
HOW FREQUENTLY SHOULD A BUSINESS CONSULT WITH A TAX STRATEGY EXPERT TO ADAPT TO CHANGING FINANCIAL LANDSCAPES?
The frequency with which a business should consult with a tax strategy expert to adapt to changing financial landscapes can vary depending on factors such as the size of the business, the complexity of its operations, and the pace of regulatory changes in the tax environment. However, as a general guideline, businesses should consider consulting with a tax strategy expert at specified intervals such as monthly, quarterly, or annually, especially when there are significant regulatory changes affecting business.
Annual consultations allow businesses to review their financial situation, tax planning strategies, and compliance measures considering any changes in tax laws, regulations, or business circumstances that may have occurred over the past year. This ensures that the business remains up to date with the latest tax developments and can adjust its tax strategies accordingly to optimize its tax position and minimize liabilities.
In addition to annual consultations, businesses may need to engage with tax strategy experts more frequently during periods of significant change or when facing specific tax-related challenges. This could include major business transactions, such as mergers or acquisitions, changes in ownership or organizational structure, expansion into new markets, or shifts in the regulatory landscape that impact tax obligations.
Ultimately, the frequency of consultations with a tax strategy expert should be tailored to the specific needs and circumstances of the business, with a focus on staying proactive and responsive to changes in the financial and tax environment to ensure effective tax management and compliance.
