Saudi Arabia splits company profits by ownership: the foreign-owned share pays 20% income tax and the Saudi and GCC-owned share pays 2.5% zakat on its zakat base. There is 15% VAT, withholding tax of 5% to 20% on payments abroad, and staged e-invoicing integration with ZATCA. A licensed regional headquarters can obtain 0% income tax and withholding tax on qualifying income for 30 years.
Income tax and zakat depend on who owns the company
Income tax applies to the share of a resident company owned by non-Saudi partners, and to non-residents doing business through a permanent establishment or earning Saudi-source income. ZATCA describes 20% as the standard rate; oil and hydrocarbon production is taxed at 50% to 85%. Zakat applies at 2.5% of the zakat base on the share held by Saudi and GCC citizens. A fully foreign-owned subsidiary pays income tax only; a joint venture with a Saudi partner pays both.
Returns are due within 120 days of the year end. Losses can be carried forward, but only up to 25% of a year's profit can be offset. Dividends from holdings of at least 10% kept for at least one year are exempt. A company must register with ZATCA before the end of its first fiscal year, and late payment costs 1% of the unpaid tax for every 30 days.123456789
Withholding tax on payments abroad
Payments from Saudi Arabia to non-residents carry withholding tax: 5% on dividends, loan charges, technical and consulting services and rent; 15% on royalties and on payments not specifically listed; and 20% on management fees. The payer files and pays monthly, within the first 10 days of the following month, and files an annual statement within 120 days of the year end.
Treaty rates can be applied at source if the payer obtains ZATCA's approval using the recipient's tax residency certificate and ZATCA's authenticated treaty form; otherwise the domestic rate is withheld and a refund is claimed, within a five-year limit. Saudi Arabia has a broad treaty network (58 treaties in PwC's table).101112131415
VAT, e-invoicing and other indirect taxes
VAT is 15%. Registration is mandatory above SAR 375,000 of annual taxable supplies and voluntary from SAR 187,500. Returns are monthly above SAR 40 million and quarterly below. E-invoicing applies in two phases: generation of compliant electronic invoices since 4 December 2021, and integration with ZATCA's Fatoora platform in waves since 1 January 2023. Wave 25 covers taxpayers with VAT-able revenue above SAR 187,500 in any year from 2022 to 2025, with an integration deadline of 1 February 2027.
Excise tax applies at 100% on tobacco and energy drinks and 50% on soft drinks. Real estate transaction tax of 5% applies to disposals of real estate.16171819202122
Regional headquarters incentives and statutory reporting
A licensed regional headquarters pays 0% income tax on eligible income and 0% withholding tax on qualifying payments to non-residents for a renewable 30 years from the licence date, provided it meets the substance tests. Breaching substance rules costs SAR 100,000, then SAR 400,000 for repeat breaches, and can suspend the incentives. Income from activities that do not qualify is taxed at 20%.
Micro and small companies (revenue and assets each up to SAR 10 million and no more than 49 employees) are exempt from appointing an auditor. Companies with foreign shareholders filing income tax returns should still expect to file audited financial statements with ZATCA. Related-party transactions must follow the arm's length principle, with supporting documentation submitted to ZATCA.232425126
| Tax | Rate | Applies to |
|---|---|---|
| Income tax | 20% | Non-Saudi share of resident companies; non-residents with a permanent establishment |
| Zakat | 2.5% of zakat base | Saudi and GCC-owned share |
| Oil and hydrocarbon production | 50% to 85% | Producers only |
| Withholding tax: dividends, loan charges, technical and consulting services, rent | 5% | Payments to non-residents |
| Withholding tax: royalties and other unlisted payments | 15% | Payments to non-residents |
| Withholding tax: management fees | 20% | Payments to non-residents |
| VAT | 15% | Taxable supplies; registration mandatory above SAR 375,000 |
| Real estate transaction tax | 5% | Disposals of real estate |
| Regional headquarters | 0% income tax and withholding tax for 30 years | Eligible RHQ income and qualifying payments |
How it works, step by step
- Register with ZATCA for income tax or zakat (automatic link from incorporation) and confirm registration before the end of the first fiscal year8ZATCA
- Register for VAT once taxable supplies exceed SAR 375,000, or voluntarily from SAR 187,50017ZATCA
- Implement e-invoicing that meets Phase One and prepare Fatoora integration for your notified wave1920ZATCA
- File monthly withholding tax returns by the 10th of the following month and apply for treaty relief where available1314ZATCA
- File the annual income tax or zakat return within 120 days of the year end53ZATCA
No timings or fees are shown unless an official source states them.
Documents usually needed
- Audited financial statements (unless the company qualifies for the micro or small company exemption)
- Annual income tax or zakat return
- Monthly withholding tax returns and the annual withholding statement
- Tax residency certificates and ZATCA treaty forms for treaty relief
- VAT returns and e-invoicing records
Common mistakes
- Assuming a joint venture pays one tax: Saudi and GCC shares pay zakat and the foreign share pays income tax.
- Withholding 5% on all service fees: management fees are 20% and unlisted payments are 15%.
- Applying treaty rates at source without ZATCA approval and supporting documents.
- Treating RHQ status as a full exemption: non-qualifying income is taxed at 20% and substance failures carry fines.
- Planning on using losses at once, when only 25% of a year's profit can be offset.
When the business crosses borders
- Check treaty rates for dividends, interest and royalties before setting intra-group charges; some treaties reduce or remove withholding.
- Management fees to a foreign parent attract 20% withholding, so the label and substance of intra-group service charges matter.
- Related-party transactions must follow the arm's length principle, with supporting documentation submitted to ZATCA.
- Saudi Arabia exchanges financial account information under CRS and has a FATCA agreement with the United States.
Questions businesses ask
What tax does a fully foreign-owned Saudi subsidiary pay?
Income tax at 20% on its taxable profits, plus withholding tax on payments abroad and VAT on its supplies. Zakat applies only to Saudi and GCC-owned shares.1310
Are dividends paid abroad taxed?
Yes. Domestic withholding tax on dividends to non-residents is 5%, which a treaty may reduce. A licensed RHQ pays 0% on qualifying dividends.101423
When does e-invoicing integration apply to us?
ZATCA notifies taxpayers by wave at least six months ahead. Wave 25 covers taxpayers with VAT-able revenue above SAR 187,500 in any year from 2022 to 2025 and must integrate by 1 February 2027.1920
Has Saudi Arabia introduced a Pillar Two minimum tax?
This research did not find an official ZATCA page confirming Pillar Two legislation in Saudi Arabia. Groups in scope of the global minimum tax should check the current position directly with ZATCA.
What this guide does not yet confirm
These points need checking with a qualified local professional in Saudi Arabia before you rely on them.
- Pillar Two (global minimum tax and any domestic minimum top-up tax) status in Saudi Arabia was not confirmed on an official page.
- Transfer pricing documentation thresholds (disclosure form, master file, local file and country-by-country reporting) were not confirmed on ZATCA's pages.
- The status of the draft new Income Tax Law published for consultation was not confirmed.
- Special Economic Zone tax incentives were not confirmed on an official page.
- The oil and hydrocarbon rates, excise rates and treaty count rely on a secondary source.
- Whether all three micro or small company audit exemption criteria must be met was not confirmed in the Companies Law Implementing Regulations.
- IFRS adoption as endorsed by SOCPA and the financial statements filing deadline on the Ministry of Commerce's Qawaem platform were not confirmed.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
Income tax is charged at the standard rate of 20% on taxable income that does not qualify for a special regime. Non-Saudi shareholdings in resident capital companies and non-residents with a permanent establishment; oil and hydrocarbon production is taxed under separate rates.
Stated by ZATCA in the RHQ guideline as the standard rate for non-qualifying income. PwC Worldwide Tax Summaries also states a 20% rate on net adjusted profits.
Income tax applies to resident capital companies in respect of shares owned by non-Saudi partners, and to non-residents doing business in Saudi Arabia through a permanent establishment or earning Saudi-source income. Shares of listed Saudi joint stock companies bought by non-Saudis for speculative trading are excluded.
Zakat is charged at 2.5% of the zakat base on the shares held by Saudi and GCC citizens, with returns and payment due within 120 days of the fiscal year end. Saudi and GCC-owned shares in companies; mixed-ownership companies pay zakat on the Saudi/GCC share and income tax on the non-Saudi share.
Zakat rules follow Ministerial Resolution No. 1007 dated 19/8/1445H, referenced in the guideline.
Income from oil and hydrocarbon production is taxed at rates from 50% to 85%. Oil and hydrocarbon producers only.
Secondary source; the ZATCA pages opened did not state these rates.
Income tax and zakat returns are due within 120 days after the end of the taxable year. All income tax and zakat payers.
The ZATCA-hosted Implementing Regulations file is largely in Arabic.
Operating losses may be carried forward against future profits, with the deduction in any year capped at 25% of that year's profit. Income tax payers; change-of-ownership restrictions may apply.
Dividends received are exempt from income tax where the investor holds at least 10% of the investee's capital for at least one year. Cash or in-kind dividends from resident or non-resident companies.
A taxable person must register with ZATCA before the end of its first fiscal year; late registration fines are SAR 10,000 for joint stock companies and SAR 5,000 for other entities. Income tax registration; natural persons face a SAR 1,000 fine.
Late payment of income tax attracts a penalty of 1% of the unpaid tax for every 30 days of delay. Income tax and withholding tax.
Withholding tax of 5% applies to dividends and to loan charges paid to non-residents. Kingdom-source payments to non-residents; treaty rates may reduce the rate.
Withholding tax of 15% applies to royalties and 20% to management fees paid to non-residents. Kingdom-source payments to non-residents; treaty rates may reduce royalty rates.
Withholding tax of 5% applies to technical and consulting services, rent and international telecommunications, while other payments to non-residents not specifically listed are taxed at 15%. Kingdom-source payments to non-residents.
Tax withheld must be reported and paid within the first 10 days of the month following payment, with an annual withholding statement due within 120 days after the fiscal year end. Resident legal persons, resident individuals paying in the course of a business, and permanent establishments of non-residents.
To apply treaty withholding rates at source, the payer applies to ZATCA through its e-services portal with the non-resident's tax residency certificate, ZATCA's treaty form authenticated by the Saudi embassy or apostilled, and an undertaking to settle any resulting tax; otherwise the domestic rate is withheld and a refund claimed. Payments to residents of countries with a double taxation agreement with Saudi Arabia; treaty claims are subject to a five-year limitation period.
Saudi Arabia has double taxation treaties with 58 countries listed in PwC's treaty withholding table. Count of treaties listed with withholding rates; signature and entry-into-force status varies.
Secondary source. ZATCA's agreements page did not give a count when opened.
The standard VAT rate is 15%. Taxable supplies in Saudi Arabia; zero-rating applies to certain exports, including services to non-resident customers.
The 1 July 2020 effective date of the increase from 5% to 15% comes from PwC Worldwide Tax Summaries (Corporate - Other taxes).
VAT registration is mandatory when taxable supplies exceed SAR 375,000 a year and available voluntarily from SAR 187,500. Businesses making taxable supplies in Saudi Arabia.
VAT returns are filed monthly where annual taxable supplies exceed SAR 40 million and quarterly otherwise. VAT-registered persons.
E-invoicing Phase One (generation) has applied since 4 December 2021 to all taxpayers except non-residents, and Phase Two (integration with ZATCA's Fatoora platform) has been rolled out in waves since 1 January 2023 with at least six months' notice per wave. VAT-registered resident taxpayers.
Taxpayers whose VAT-able revenues exceeded SAR 187,500 in 2022, 2023, 2024 or 2025 are targeted in Wave 25 and must integrate with Fatoora by 1 February 2027. Taxpayers notified by ZATCA for Wave 25.
Excise tax applies at 100% on tobacco products and energy drinks and 50% on soft drinks. Excise goods produced in or imported into Saudi Arabia.
Secondary source; ZATCA excise pages could not yet be checked.
Real estate transaction tax is charged at 5% on the disposal of real estate, including transfers of ownership for more than 50 years. Real estate disposals; exemptions apply under the RETT regulations.
Guideline updated to match Royal Decree No. M/84 dated 19/03/1446H.
A licensed regional headquarters pays 0% income tax on income from eligible activities and 0% withholding tax on qualifying payments to non-residents for a renewable period of 30 years from the licence date. RHQ licensed by the Ministry of Investment that meets ZATCA's conditions and economic substance requirements; non-qualifying income is taxed at 20%.
The 16 February 2024 effective date of the RHQ tax rules comes from PwC Worldwide Tax Summaries (Significant developments).
Regional headquarters economic substance violations carry a SAR 100,000 fine if not remedied within 90 days and SAR 400,000 for repeat violations, and incentives may be suspended. Licensed RHQs claiming tax incentives.
Micro and small companies with annual revenue and assets of no more than SAR 10 million each and no more than 49 employees are exempt from appointing an auditor. Companies under the Companies Law; the director or chairman must attach a statement to the financial statements.
Thresholds as described by the Ministry of Commerce; confirm whether all criteria must be met in the Companies Law Implementing Regulations. Companies with non-Saudi shareholders filing income tax returns are generally expected to file audited financial statements (PwC, Tax administration).
Related-party transactions must follow the arm's length principle, with supporting documentation submitted to ZATCA. Taxpayers with related-party transactions; documentation thresholds were not confirmed.
Stated in the RHQ guideline. Article 10(11) of the Income Tax Implementing Regulations also disallows related-party charges above independent-party prices.
Questions on this topic
26 statements on tax, zakat and statutory reporting in Saudi Arabia
