Saudis and GCC nationals are not subject to income tax. Self-employed foreigners who are resident in Saudi Arabia are not taxed on income from non-Saudi sources but only on Saudi-source income. Foreign employees are not taxed on their wages and salaries. When applicable, income tax is levied by reference to the following table:
If the period which the foreigner stays in the Kingdom exceeds one year, the first SAR 6,000 of income will not be taxed.
Zakat is the religious wealth tax imposed on Saudis and GCC nationals, and on companies entirely owned by them. In case of mixed participation, zakat is assessed by reference to the proportion of Saudi or GGC participation. Zakat rates are 2.5% of capital which is not invested in fixed assets or long term investments or which relates to deferred pre-incorporation expenses.
Withholding tax is imposed on payments made to non-residents and to persons not registered with the tax authorities for activities within the Kingdom. Tax must be withheld based on deemed minimum profit of 15% of the payment. Certain management fees, license fees and royalties are taxed assuming a 100% profit. Companies must withhold tax on payments to non-residents including foreign shareholders regardless of any tax holiday granted to the company.
Double Taxation Treaty
The only double tax treaty signed in Saudi Arabia is with France. Similar treaties have been negotiated with Britain and with Germany. Countries, including Britain, Germany, Japan, and the United States, allow taxpayers to take a credit against their taxable income in such countries for any Saudi Arabian income tax paid.