What is Corporate Income Tax?
Corporate income tax is the tax imposed on a company’s profits. In Saudi Arabia, it applies to the share of profits attributable to non-Saudi and non-GCC shareholders, while Saudi and GCC nationals’ shares are subject to zakat instead. The standard rate is 20%, with higher rates for oil, gas, and natural hydrocarbons.
How It Works
- Determine the taxable income by adjusting accounting profit for non-deductible items, tax-exempt income, and tax-only deductions.
- Apply the 20% rate (or sector-specific rate) to the non-Saudi/non-GCC share.
- File the income tax return within 120 days of the financial year-end through the ZATCA portal.
- Pay any tax due and submit supporting documents and audited financials.
Saudi Context
Corporate income tax is administered by ZATCA. Many Saudi entities are mixed-ownership and file both zakat (Saudi/GCC share) and income tax (foreign share). Withholding tax also applies to certain payments to non-residents at rates between 5% and 20% depending on the type of income and any tax treaty.
Example
A Saudi LLC with 70% Saudi and 30% foreign ownership earns SAR 10 million pre-tax profit. SAR 7 million is subject to zakat (2.5% = SAR 175,000) and SAR 3 million to corporate income tax (20% = SAR 600,000).
