SAUDI ARABIA Law and Practice Contributed by: Dana Halwani and Leanne Farsi, Derayah LLPC
(b) SAR4,200 for a six-month licence period; (c) SAR5,600 for a nine-month licence pe - riod; and (d) SAR8,400 for a 12-month licence period. • Expats exceeding the number of Saudi employees: (a) SAR2,400 for a three-month licence period; (b) SAR4,800 for a six-month licence period; (c) SAR7,200 for a nine-month licence pe - riod; and (d) SAR9,600 for a 12-month licence period. Small businesses with a total workforce of nine employees or less, including the owner, are relieved of the obligation to pay this charge on employees for three years. In addition, a monthly charge is imposed on expatriates’ dependants. While the charges on expatriate employees must be borne by the employer, many employers do not cover the levy on dependants, which is therefore, in effect, a form of income tax. 5.2 Taxes Applicable to Businesses Zakat Saudi Arabian interests pay zakat, which is a religious wealth tax based on the taxpayer’s net worth, not income. The effective rate is 2.5% of the net worth of natural persons and 2.5% of the total capital resources of companies. For com - panies, the tax base for the calculation of zakat excludes fixed assets, long-term investments and deferred costs from total capital resources, but includes profits from foreign investments that do not consist of investment in real property. Under the Income Tax Regulation (Royal Decree No M/1 of 15 Muharram 1425 Hejra correspond - ing to 7 March 2004), most foreign interests that conduct business in Saudi Arabia pay income
tax at a flat rate of 20% of the profits. Oil and hydrocarbon production income are taxed at a rate of 50% to 85%. When a company has Saudi and non-Saudi shareholders, the Saudi share- holders pay zakat, and the non-Saudi sharehold - ers pay income tax. Withholding Tax Payments made from a resident party or a per - manent establishment to a non-resident party for services rendered are subject to withholding tax, at rates which may, depending on which type of service was performed, vary between 5%, 15% and 20%, VAT Since 1 July 2020, value-added tax (VAT) has been payable at a rate of 15%. 5.3 Available Tax Credits/Incentives Net operating losses may be carried forward by non-Saudi investors from one year to the next. Any loss that has been carried forward may be deducted from the tax base of future taxable years until the cumulative loss is fully offset. In March 2020, ZATCA launched an initiative granting amnesty in relation to tax filing and payment penalties for excise tax, VAT, withhold - ing tax, income tax and zakat. The initiative was initially set to run for the period of 18 March 2020 to 30 June 2020, but has been extended multiple times since its launch. The latest extension was until 30 June 2025. The Regional Headquarters Tax Rules (issued by resolution of the Board of Directors of the Zakat, Tax and Customs Authority No (24-1-9) dated 23 Rajab 1445 Hejra corresponding to 4 February 2024), allows qualifying multinational companies which relocate their regional headquarters (RHQ) to Saudi Arabia to benefit from a 30-year income
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