Tax Rates in Saudi Arabia

Update note (September 2026): The rates, thresholds and deadlines on this page were compiled from Zakat, Tax and Customs Authority (ZATCA) and Ministry of Investment (MISA) publications as at September 2026. Legislation changes, so official announcements should be confirmed before any final decision. For the incorporation steps, see our Saudi Arabia company formation page.

Table of Contents

How Does the Saudi Tax System Work?

As the largest economy in the Gulf Cooperation Council (GCC), Saudi Arabia has rebuilt its tax architecture under the Vision 2030 programme. The drive to reduce dependence on oil revenue produced concrete results: VAT was introduced, the Fatoora e-invoicing infrastructure was rolled out, special economic zone regimes came into force and digital filing became the norm. The Kingdom still levies no personal income tax on salaries and wages, while corporate income tax, zakat, VAT, withholding tax and excise duty are all administered under a single roof by the Zakat, Tax and Customs Authority (ZATCA).

One point decides almost everything for an investor: a company's fiscal burden splits according to the share of foreign versus local (Saudi/GCC national) ownership in its capital. Profit attributable to foreign shareholders is subject to corporate income tax, while the portion attributable to Saudi and GCC nationals is subject to zakat. In mixed ownership both obligations run in parallel, in proportion to the respective shareholdings. This dual structure is what most clearly distinguishes Saudi Arabia from its regional peers, and it makes the choice of entity type and the drafting of the shareholders agreement decisions to be taken at incorporation rather than afterwards. The legal form – limited liability company, joint stock company, branch of a foreign company or regional headquarters – directly determines the applicable regime.

What Is the Corporate Tax Rate in Saudi Arabia?

The standard corporate income tax rate in Saudi Arabia is 20%, applied to the adjusted net profit attributable to foreign capital. It covers foreign investors operating in the Kingdom, foreign shareholders and non-resident entities earning Saudi-source income. No distinction is drawn between local and foreign companies in administrative or procedural terms; the basis of taxation rests entirely on the ownership structure. Returns are filed annually with ZATCA on the profit of the relevant financial year.

In calculating taxable profit, documented expenses incurred directly in earning that income are deductible. Three items are routinely overlooked by newly established companies: depreciation is applied at different rates depending on the asset class, interest deductibility is subject to limitation rules, and although prior-year losses may be carried forward indefinitely, the amount offset in any single year is capped at 25% of that year's taxable profit. That ceiling has a direct effect on cash flow planning for businesses that report losses in their early years.

Sector-Specific Rates and Special Regimes

Oil and hydrocarbon production is taxed on a sliding scale from 50% to 85%, based on the size of the capital investment – the larger the investment, the lower the rate. The separate natural gas investment tax regime that once existed was repealed with effect from the beginning of 2018; natural gas investments are now taxed at the standard 20% under the general provisions. The elevated rates apply only to natural resource extraction and never to ordinary commercial activity.

Capital Gains and Branch Profits

Capital gains realised by non-residents on the disposal of shares are generally taxed at 20%. Disposals of shares listed on Tadawul may be exempt under certain conditions, and double tax treaty provisions can also provide relief. For branches of foreign companies, profits remitted to head office are subject to withholding tax at the point of transfer. Any profit repatriation plan should therefore weigh both items together rather than in isolation.

What Is Zakat, Who Pays It and How Is It Calculated?

Zakat is a religiously grounded financial obligation levied on the share of capital held by nationals of Saudi Arabia and the other GCC states. Its fundamental difference from corporate income tax is that it is calculated not on profit alone but on the zakat base – a capital base built from equity, long-term provisions, retained earnings and a set of prescribed adjustments. Fixed assets and certain investments are deducted from that base.

One point is frequently stated incorrectly. The zakat rate is 2.5% for taxpayers filing on a Hijri year and 2.578% for those filing on a Gregorian year, the uplift reflecting the roughly eleven additional days in the solar year. Because the large majority of corporate taxpayers use a Gregorian financial year, 2.578% is the rate that applies in practice. The current calculation rules derive from the new Zakat Implementing Regulation applicable to financial years beginning on or after 1 January 2024.

Wholly Saudi/GCC-owned companies are subject only to zakat; wholly foreign-owned companies only to corporate income tax. In mixed-ownership companies the base is split according to shareholding and the two obligations run in parallel. Zakat returns are likewise filed annually with ZATCA.

What Is the VAT Rate in Saudi Arabia?

Saudi Arabia introduced VAT at 5% at the start of 2018 and tripled it to 15% in July 2020 to strengthen the fiscal balance. The standard rate remains 15% as at September 2026. VAT is an indirect consumption tax charged on supplies of goods and services and on imports, and is ultimately borne by the end consumer.

Zero-Rated Supplies, Exemptions and Registration Thresholds

Exports of goods outside the GCC territory and certain services supplied to non-GCC residents are zero-rated (0%), and input VAT incurred on those supplies may be recovered. Part of the financial services sector, residential leases and certain healthcare and education services are exempt instead. The distinction matters: input VAT is recoverable on zero-rated supplies but not on exempt ones.

VAT registration is mandatory for businesses whose annual taxable supplies exceed SAR 375,000, and voluntary above SAR 187,500. The filing period depends on turnover: taxpayers above SAR 40 million file monthly, those below file quarterly. Returns and payment are due by the end of the month following the period.

Withholding Tax Rates in Saudi Arabia

Certain payments made to non-resident parties are subject to withholding tax. The Saudi payer deducts, reports and remits the tax to ZATCA. Rates range from 5% to 20% depending on the nature of the payment.

The 15% rate that once applied to technical and consulting services supplied by a head office or related group company was abolished in 2023. The rate is now a flat 5% irrespective of who provides the service – a change that is worth revisiting in any regional service-fee structure.

Double Tax Treaties and Treaty Relief

Saudi Arabia has more than 59 double tax treaties in force, with several further agreements signed but not yet effective. These treaties can reduce or eliminate withholding tax on payments to residents of the counterparty state. Claiming relief requires supporting documentation, typically a certificate of tax residency and a beneficial ownership declaration, prepared before the payment is made rather than afterwards. Germany, notably, has no comprehensive income tax treaty with Saudi Arabia – only a limited agreement covering air transport.

Personal Income Tax, RETT, Excise and Customs Duties

Personal Income Tax and GOSI Contributions

There is no personal income tax in Saudi Arabia (0%). Salaries, wages and professional income are not subject to individual income tax, which is the single strongest factor making the Kingdom attractive to skilled staff and senior executives. Social insurance, however, does apply: total GOSI contributions for Saudi national employees sit at roughly 21.5% across employer and employee shares and are rising in stages under the new Social Insurance Law, while for expatriate employees only a 2% occupational hazards contribution is payable, borne by the employer. Payroll budgeting has to account for that distinction.

Real Estate Transaction Tax (RETT)

Real estate transfers attract a 5% Real Estate Transaction Tax on the disposal value. Having replaced VAT on property sales from 2020, RETT was recast by a new law and implementing regulations that took effect on 9 April 2025. The rate is unchanged, but the regime is not: new exemptions were introduced for indirect transfers in mergers and acquisitions and for transfers of listed securities and fund units, the definition of a "real estate company" was narrowed, and the late payment penalty was cut from 5% to 2% per month with an overall 50% cap. ZATCA also gained a three-year window to challenge transactions declared below fair market value.

Excise Tax

Excise tax of 100% applies to tobacco products and energy drinks on public health grounds. The long-standing flat 50% rate on sweetened beverages was replaced with effect from 1 January 2026 by a tiered model based on sugar content: no excise per litre where the product contains less than 5 g of sugar per 100 ml, SAR 0.79 per litre between 5 g and 7.99 g, and SAR 1.09 per litre at 8 g or above. Importers and manufacturers have had to review product formulations against those thresholds, with material cost consequences.

Customs Duties

Imports are subject to the GCC Common Customs Tariff, with rates generally between 0% and 25% depending on the product group; higher rates apply to a limited set of protected categories. Import VAT of 15% is charged on the customs value in addition. For companies exporting regularly to Saudi Arabia or setting up warehousing and distribution locally, correct tariff classification is one of the largest single variables in landed cost.

Tax Incentives: RHQ Programme and Special Economic Zones

In line with Vision 2030, Saudi Arabia offers one of the most ambitious incentive packages in the region for attracting foreign direct investment.

The Regional Headquarters programme grants multinationals that relocate their regional base to the Kingdom 0% corporate income tax and withholding tax exemption on qualifying payments for 30 years from the date the RHQ licence is issued; the benefit is confined to activities covered by that licence. The tax and regulatory framework for the special economic zones came into force during 2026, with economic substance rules published in the same year – which makes documenting that the activity is genuinely carried on inside the zone essential to any SEZ application. The Cloud Computing zone operates under a separate framework and is not covered by the 5% flat rate. Priority sectors such as technology, renewable energy, logistics, tourism and manufacturing additionally benefit from infrastructure support and accelerated licensing.

Filing Deadlines, Advance Payments and ZATCA Penalties

Knowing the rates is not enough. In Saudi Arabia, much of the financial risk arises from the calendar and from procedural obligations. The outline below summarises the annual cycle for a standard taxpayer.

Late Filing Penalties and the Amnesty Window

A delay penalty of 1% of the unpaid amount applies for every 30 days of delay on advance payments. Failure to file a VAT return on time attracts a penalty of between 5% and 25% of the tax due, and e-invoicing breaches can draw administrative fines of SAR 5,000 to SAR 50,000 per violation. The statute of limitations is generally five years, extending to ten where no return was filed or evasion is alleged. ZATCA's penalty waiver initiative has been extended to 31 December 2026, allowing qualifying late registration, late payment and late filing penalties to be lifted – a limited window for companies wanting to regularise historic non-compliance.

E-Invoicing, Permanent Establishment and Transfer Pricing

Saudi Arabia leads the region on digital tax compliance through the ZATCA-run Fatoora e-invoicing system. It operates in two stages: the generation phase requires electronic invoices to be issued in a standard format, while the integration phase requires them to be transmitted to the ZATCA platform in real time. Businesses are brought into scope in waves according to turnover thresholds, and those thresholds have fallen steadily – the wave announced in mid-2026 extends the integration obligation to taxpayers with VAT-subject revenue above SAR 187,500. In practice that means near-universal coverage of registered taxpayers.

When Does a Permanent Establishment Arise?

For foreign businesses operating in Saudi Arabia without incorporating locally, permanent establishment exposure is the sharpest risk. A fixed place of business, a branch, a construction or installation project exceeding a defined duration, or a dependent agent habitually concluding contracts in the Kingdom can each create a PE. Once one exists, the related income falls under corporate income tax with a full filing obligation rather than simple withholding. Carrying out that assessment at the tender stage of a long-running project removes most of the assessment risk that would otherwise emerge later.

Transfer Pricing Obligations

Related-party transactions are governed by OECD-aligned transfer pricing rules, which have applied to zakat payers as well since the 2024 financial year. Taxpayers above the relevant thresholds must maintain a Master File and Local File and, where consolidated revenue exceeds SAR 3.2 billion, submit Country-by-Country Reporting. Annual documentation of the arm's length nature of related-party transactions is among the items ZATCA queries most often during audits.

Worked Example: Tax Burden in a Mixed-Ownership Company

Take a limited liability company in Riyadh whose capital is 60% held by a foreign investor and 40% by a Saudi partner. Assume adjusted net profit for the year of SAR 1,000,000 and a calculated zakat base of SAR 4,000,000.

The lesson is straightforward: because zakat attaches to the capital base rather than to profit, the zakat burden can be heavier than expected in years when profit is modest but equity is substantial. Shareholding ratio, capital structure and dividend policy therefore need to be planned as one. For the incorporation steps see our article on company formation processes in Saudi Arabia, and for banking and payment infrastructure see corporate banking in Saudi Arabia.

Saudi Arabia Compared With Other GCC Countries

Judging a jurisdiction on its headline rate alone is misleading. Market size, the volume of public procurement, incentive programmes and proximity to customers weigh at least as heavily as the rate itself.

Saudi Arabia's 20% sits above the 9% charged in the United Arab Emirates, yet domestic market size, the scale of public investment programmes and the RHQ incentive more than offset that gap for many multinationals – not least because a regional headquarters presence is a condition of participation in significant public tenders. A second regional divergence is worth noting: while the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman have all enacted global minimum tax (Pillar Two) measures, Saudi Arabia has not, as its 20% headline rate already exceeds the 15% minimum. For tax and accounting obligations on the Emirati side, see our Dubai tax consultancy page.

Saudi Arabia Tax Rates Summary Table

Your Next Step in Tax Planning

With no personal income tax, a competitive 20% corporate rate and the RHQ and special economic zone incentives, Saudi Arabia is among the strongest investment destinations in the region. Against that, the zakat and corporate tax duality, withholding obligations, 15% VAT compliance, Fatoora integration and transfer pricing documentation all demand professional planning. A poorly structured ownership model or a late registration can cost far more than the rates themselves.

World Company Setup supports you across the whole process, from incorporation and ZATCA registration to setting up the accounting infrastructure and filing incentive applications. To review your own position, you can request a quote and consultancy.

References

1. Zakat, Tax and Customs Authority (ZATCA) – zatca.gov.sa
2. Ministry of Investment of Saudi Arabia (MISA) – misa.gov.sa
3. PwC Worldwide Tax Summaries, Saudi Arabia – taxsummaries.pwc.com
4. KPMG, Doing Business in Saudi Arabia (2026)
5. ZATCA announcements on the Fatoora e-invoicing waves