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- Zakat is levied on every Saudi or GCC state’s establishment that suffices the Kingdom’s residency requirements and conditions. It is also levied on the shares of Saudi partners in mixed companies.
- Non-Saudi establishments: Income tax is levied. - Saudi or GCC establishments: Zakat is levied (if residency conditions are satisfied by GCC establishments). - Mixed establishments: Zakat is levied upon the Saudis’ share of the capital. Income tax is levied upon the non-Saudi share of net profit.
- Every establishment subject to Zakat is obligated to file its zakat returns within 120 days as of the end of its fiscal year through ZATCA online portal.
- Financial statements for Zakat purposes are required to be audited by an independent certified public accounting firm before filing them.
Zakat is not levied on such entities if the following obligations are met: - The funds are not owned by a particular person. - The revenues are allocated for general charitable purposes. - The charity is licensed by accountable authorities, and its objectives are identified.
All ordinary and necessary expenses required for the activity, whether they were already paid or still payable in order to reach the net result of the activity, are deductible as per to the following requirements: - It should be an actual expenditure substantiated by supporting documents or other proofs that allow GAZT to confirm them even if it is linked to previous years. - It should be relevant to business activity, not to personal expenses or other pursuits. - It should not be of capital nature. If capital expenses are involved within the expenses, the result of the business activity will be amended, and the capital expenditure will be added to the fixed assets and addressed according to the regular percentages.
- Establishments owned by the same partners, the holding company and its subsidiaries owned by the same partners may submit a unified Zakat declaration.
- The holding company and its wholly owned subsidiaries, whether the subsidiaries are registered inside or outside the Kingdom, and whether this ownership is directly or indirectly, must submit consolidated accounts and a unified Zakat declaration and be charged on the basis of what their results show in one Zakat base.
- Zakat is levied upon the part of the loan that passed a year in position.
- The taxable person who has terminated his business activity should notify ZATCA within 60 days from the termination date, file confirmation of financial obligations clearance.
- Withholding tax is a direct tax deducted from all returns earned by a non-resident from any source in Saudi Arabia. The tax rate is specified in the Implementing Regulations of the Income Tax Law.
- Article 68 of the Income Tax Regulations and Article (63) of the Implementing Regulations stipulates that when paying any expenses from a source in Saudi Arabia by a resident to a non-resident establishment (whether a GCC establishment or a non-GCC establishment), the expenses paid are subject to withholding tax, and its rate is defined by the type of services provided as stipulated in the Law and Regulations.
- If the services of the advertising company abroad are restricted to promoting the company's local products through TV channels without having a role in designing films or developing of any related marketing research, the expenses paid are not considered to have been obtained from a source in Saudi Arabia, as stipulated in paragraph (A / 8) of Article 5 of the Income Tax Law; because these expenses have occurred from services and therefore are not subject to a withholding tax. If the marketing of the company was developed within Saudi Arabia, all services concluded, in this case, are subject to a withholding tax.
- If such purchase involves the transfer of all rights, in this case, it is considered a purchase of goods not subject to Withholding Tax. But If it is purchased or leased to be used in local broadcasting and was licensed by the seller without granting the buyer the full legal right of such materials, it is considered a royalty payment and will be subject to a 15% Withholding Tax
- Such a resident company is subject to Zakat as per the share of the GCC natural person, whether resident or not, and the dividends distributed to that person by the resident company will be subject to withholding tax if the person is not a resident.
- The foreign partner who owns less than 50% in a mixed Saudi company does not fall within the definition of Related Persons as stipulated in article 64 of the Income Tax Law, so such services are not subject to a 15% Withholding Tax, but a 5% Withholding Tax, because the definition of ownership is only eƯectuated when the percentage of ownership is 50% or more as stipulated in paragraph (c) of Article (64) of the Law.
- Upon payment of such expenses to agents or representatives of the airlines, it will not be subject to the withholding tax. Such expenses will be estimated in the company's records in ZATCA.
- Shipping costs from Saudi Arabia to collection points abroad-paid to non-resident shipping companies- will be subject to Withholding Tax as stipulated in the provisions of Article 5 (A / 8) of the Income Tax Law. For shipping costs from assembly points outside the Kingdom to all parts of the world -paid to non-resident companies- if the company is committed to delivering the packages to its final delivery locations abroad, the shipment of packages in this case from the assembly points abroad to the final delivery locations Is an extension of the process of shipping from the Kingdom to the external assembly points, i.e., it represents a single continuous process, therefore, its revenue is subject to Withholding Tax. If, however, the obligation of the shipper ends only by delivering the shipment to the external port without obligation to deliver it to the final customer's premises, the shipment from the external port to the final customer's premises, in this case, becomes an independent operation and the income earned is not the result of the same activity in the Kingdom; therefore, it will not be subject to Withholding Tax.
- Certified Public Accountant's statement on the validity of the return means that the accountant confirms the validity of the tax return, especially that the return information is derived from the books and records of the establishment and verify its compatibility, and that the return was prepared as per the provisions of the Saudi Income Tax Law. This will be complied with if the taxable income exceeds one million Saudi riyals. The taxable income in question is the total income before deduction of expenses. The standards to be followed by the accountant are the standards set out in the Income Tax Law and its Regulations in addition to the standards issued by the Saudi Organization for Certified Public Accountants.
- Establishments are not obligated to file financial statements along with tax returns. However, GAZT may request them whenever it is deemed necessary.
- Taxpayers can file an amended tax return after ZATCA’S approval. ZATCA is entitled to either accept or reject the amended return or, in case of acceptance, amend it and impose fines as stipulated in the Tax Law, as appropriate.
- Each of the subsidiaries or wholly owned companies of the holding company shall submit a separate tax return and pay the tax due thereunder, and the holding company's declaration shall not be suƯicient.
- Article 18 of the Law stipulates that all expenses of enhancements and improvements of each Group of assets incurred during the year will be regarded as expenses, provided that the total amount of such expenses do not exceed 4% of the rest of the value of the Group (ie, after calculating the depreciation at the end of the year in which the expense was incurred ). If these expenses exceed 4% of the rest of the Group, the excess amount will be added to the rest of the value of the Group to be consumed in the following years.
A. The tax rate imposed on the tax base is 20% for: - Resident capital company. - Natural non-Saudi residents who conduct business in Saudi Arabia. - Non-resident persons who conduct business in Saudi Arabia through a permanent establishment. B. The Income Tax imposed on the income base of a taxpayer working in natural gas investment sector is 20% only. C. The Income Tax imposed on the income base of a taxpayer working on oil and hydrocarbons production is as follows: - 50% imposed on a taxpayer whose total capital investment in Saudi Arabia exceeds three hundred and seventy-five billion Saudi Riyals. - 65% imposed on a taxpayer whose capital investment in Saudi Arabia exceeds three hundred billion Saudi Riyals and up to three hundred seventy-five billion Saudi Riyals. - 75% imposed on a taxpayer whose capital investment in Saudi Arabia exceeds two hundred and twenty-five billion Saudi Riyals and less than three hundred billion Saudi Riyals. - 85% imposed on a taxpayer whose capital investment in Saudi Arabia is no more than two hundred and twenty-five billion Saudi Riyals. D. The Income Tax imposed to a person working in Saudi Arabia in both oil and hydrocarbons production sector, and natural gas investment sector is the total tax payable of the tax base of such person under paragraphs (B) and (C) of this article.
- Directors' wages paid to the owner, partner or shareholder will not be considered as deductible expenses (except for the wages paid to the shareholder in the joint-stock companies) as stipulated in the provisions of paragraph (1) of Article ten of the Implementing Regulations of Income Tax Law.
- In this case, the non-resident partner is subject to Zakat, while any distributed profits are subject to Withholding tax.
- Paragraph (b / 1) of Article Four of the Tax Law considers the following cases as permanent establishment for non-residents: construction sites, assembly facilities and its supervisory operation. Therefore, the GCC company that will execute such contract will be considered as a permanent establishment and will be subject to Income Tax, not Withholding Tax.
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