Corporate Income Tax
- Foreign-owned companies, including subsidiaries of U.S. firms, are subject to 20% corporate income tax on net profits in Saudi Arabia.
- If the company is a joint venture with Saudi ownership, only the foreign share of profits is taxed at 20%, while the Saudi share is subject to Zakat.
Zakat (if applicable)
- Zakat is a religious levy of 2.5% on the Zakat base.
- It applies only to Saudi and GCC nationals and their ownership share in the company.
Withholding Tax (WHT)
- Payments made to the U.S. parent company for services, royalties, or dividends may be subject to WHT:
- 5% on dividends
- 15% on royalties and technical services
- These rates apply to cross-border transactions and must be withheld by the Saudi entity.
Value Added Tax (VAT)
- If the IT company sells goods or services locally, it must register for VAT.
The standard VAT rate is 15%, applicable to most transactions.
Transfer Pricing Compliance
- Saudi Arabia enforces transfer pricing rules, requiring documentation for transactions between related entities (e.g., the Saudi subsidiary and U.S. parent).
- This ensures that intercompany pricing is at arm’s length and not used to shift profits.
E-Invoicing and Tax Registration
- Companies must comply with e-invoicing regulations and register with the Zakat, Tax and Customs Authority (ZATCA).