In Saudi Arabia, the tax a company pays on its results depends on who owns it. Both are administered by ZATCA, and both are filed on one annual return.
| Ownership share | What it pays | Rate | Calculated on |
|---|---|---|---|
| Saudi and GCC nationals | Zakat | 2.5% | The zakat base (broadly, equity and long-term funding less long-term assets, or adjusted profit if higher) |
| Foreign (non-GCC) owners | Corporate income tax | 20% | Taxable profit for the year |
A worked example
A Riyadh company is 60% Saudi-owned and 40% owned by a foreign partner. Its taxable profit is SAR 1,000,000 and its zakat base is also SAR 1,000,000.
- Income tax on the foreign share: 1,000,000 × 40% × 20% = SAR 80,000
- Zakat on the Saudi share: 1,000,000 × 60% × 2.5% = SAR 15,000
- Total: SAR 95,000, an effective 9.5% of profit
Why the zakat base is different from profit
Zakat is closer to a tax on wealth than on profit. The zakat base starts from equity, retained earnings, provisions and long-term loans, then deducts long-term investments and fixed assets. A company with little profit but a large capital base can still owe zakat. Getting the base right is where most savings, and most disputes, happen.
Other things to know
- The annual return is due within 120 days of the year end.
- Withholding tax (5%–20%) applies when you pay non-residents for services, royalties, interest and more.
- Records must support the figures. ZATCA can assess zakat on estimated figures if books are weak.
Estimate your own figures with the corporate tax and zakat estimator.
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KasemCPA can review your numbers, build the model properly or set it up in Odoo.