Saudi Tax Guide: VAT, Zakat & Withholding

📚

Looking for comprehensive tax guidance?

View our complete Saudi Tax & Compliance Guide with detailed breakdowns of VAT, Zakat, WHT, CIT, e-invoicing, transfer pricing, and compliance calendars.

View Full Tax Guide

15%

VAT

Standard Value Added Tax applied to most goods and services.

20%

Corporate Tax

Applied to net profits of foreign-owned shares in resident companies.

2.5%

Zakat

Applied to the net worth of GCC-owned shares.

Our Tax Services

➤
ZATCA Registration:
Initial registration for VAT, Zakat, and CIT upon company formation.
➤
Filing & Returns:
Monthly/Quarterly VAT filing and annual financial declarations to avoid fines.
➤
E-Invoicing (Fatoora):
Implementation support for Phase 1 and Phase 2 ZATCA integration requirements.
➤
Withholding Tax (WHT):
Calculation and filing for payments made to non-resident parties.

Deadlines Matter

Late filing in Saudi Arabia attracts automatic penalties. ZATCA systems are highly digitized and linked to government services.

Warning: Failure to pay Zakat/Tax certificates blocks renewal of licenses and visas.

Understanding Saudi Arabia's Tax System for Foreign Companies

15%

Value Added Tax (VAT)

Saudi Arabia introduced VAT at 5% in January 2018 and raised it to 15% in July 2020. VAT applies to most supplies of goods and services made in Saudi Arabia, with limited exceptions (basic foodstuffs, healthcare, education in some cases).

Registration thresholds

• Mandatory: taxable turnover > SAR 375,000/year
• Voluntary: taxable turnover > SAR 187,500/year
• Non-resident suppliers may have reverse-charge obligations

Filing frequency

• Monthly: large businesses (turnover > SAR 40M)
• Quarterly: most SMEs and medium businesses
• Annual returns + final reconciliation

E-invoicing (Fatoorah): ZATCA's e-invoicing mandate (Phase 1 from Dec 2021, Phase 2 from Jan 2023 onwards) requires VAT-registered businesses to issue and receive e-invoices via ZATCA-approved systems. Phase 2 requires real-time integration with ZATCA's portal for tax invoices above SAR 1,000.

20%

Corporate Income Tax (CIT)

The 20% CIT rate applies to the taxable income attributable to the foreign shareholder's interest in a Saudi entity. For a 100% foreign-owned LLC, all taxable income is subject to CIT. The tax year follows the Gregorian calendar year (or the company's fiscal year if different).

Key CIT rules

• Tax base: net taxable income (revenues minus allowable deductions)
• Loss carryforward: losses can be carried forward indefinitely (capped at 25% of taxable income per year)
• Thin capitalisation rules apply to related-party debt
• Transfer pricing documentation required for related-party transactions

Filing requirements

• Annual CIT return filed with ZATCA — due within 120 days of fiscal year end
• Quarterly advance tax payments required if prior year tax > SAR 5,000
• Audited financial statements required
• ZATCA clearance certificate required for licence and visa renewals

2.5%

Zakat

Zakat is an Islamic religious levy applied to the Saudi-national or GCC-national shareholder's equity in a Saudi company. It is not an income tax — it is calculated on the Zakat base, which is broadly equivalent to net equity adjusted for certain assets and liabilities.

Zakat base

• Broadly: opening equity + net income + long-term debt
• Less: fixed assets, long-term investments, losses
• Complex calculation requires a specialist
• Different rules for Zakat vs CIT mixed companies

Who pays Zakat?

• Saudi national shareholders (individuals and companies)
• GCC national shareholders
• Saudi government-owned entities
• Mixed companies: pro-rated — Zakat on Saudi/GCC portion; CIT on foreign portion

WHT
5–15%

Withholding Tax (WHT)

Saudi Arabia imposes withholding tax on certain payments made by Saudi residents to non-residents. The Saudi entity making the payment is responsible for withholding the tax and remitting it to ZATCA within the first 10 days of the following month.

Payment type	WHT rate
Dividends to non-residents	5%
Royalties and technical services	15%
Management fees	20%
Interest	5%
Rent payments to non-residents	15%
Insurance premiums to non-residents	5%
Air/sea transport (non-residents)	5%

Double Taxation Treaties (Saudi has 50+ active DTTs) can reduce these rates. Confirm treaty position before structuring cross-border payments.

Tax & Zakat Services

Looking for comprehensive tax guidance?

VAT

Corporate Tax

Zakat

Our Tax Services

Deadlines Matter

Understanding Saudi Arabia's Tax System for Foreign Companies

Value Added Tax (VAT)

Registration thresholds

Filing frequency

Corporate Income Tax (CIT)

Key CIT rules

Filing requirements

Zakat

Zakat base

Who pays Zakat?

Withholding Tax (WHT)

Don't let late filing block your licence or visa renewals.

Pair tax compliance with full operational coverage