Indirect Tax
Ali F Almahroos
(resident in Manama)
+973 1713-5119
Mobile: +973 3434-3440
Email: ali.almahroos@bh.ey.com
Jeddah GMT +3
Ernst & Young Professional Services (Professional LLC)
+966 (12) 221-8400
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P.O. Box 1994
Jeddah 21441
Saudi Arabia
Street address: 13th Floor, King’s Road Tower
King Abdulaziz Road
Al Shatea District
Jeddah
Saudi Arabia
Global Compliance and Reporting
Ayman Abu El Ezz
Dana Dandashi
Asem Habis
Business Tax Advisory
Hussain Asiri
Amro El Fadly
Khalid Feroze
Ahmed Mubarak
+966 (12) 221-8417
Mobile: +966 555-237-020
Email: ayman.abueizz@sa.ey.com
+966 (12) 221-8400
Mobile: +966 (53) 600-0167
Email: dana.dandashi@sa.ey.com
+966 (12) 221-8501
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Email: asem.habis@sa.ey.com
+966 (12) 221-8505
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Email: hussain.asiri@sa.ey.com
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+966 (12) 221-8502
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Email: khalid.feroze@sa.ey.com
+966 (12) 221-8413
Mobile: +966 (58) 263-9955
Email: ahmed.mubarak@sa.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Suleman Mulla
+966 (12) 221-8400
Mobile: +966 (50) 879-1735
Email: suleman.mulla@sa.ey.com
International Tax and Transaction Services – Transfer Pricing
Ricardo Cruz
Indirect Tax
Adrian Smith
+966 (11) 260-5680
Mobile: +966 554-671-694
Email: ricardo.m.cruz.sanchez@sa.ey.com
+973 1713-5182
Mobile: +973 3353-1226
Email: adrian.smith2@bh.ey.com
Ernst & Young Professional Services (Professional LLC)
Mail address:
P.O. Box 2732
Riyadh 11461 Saudi Arabia
+966 (11) 215-9898
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Street address: Al Faisaliah Office Tower – Levels 6 and 12
King Fahd Road
Olaya, Riyadh Saudi Arabia
Global Compliance and Reporting
Asim J. Sheikh
Imran Iqbal
Suleiman Mohammed
Amr Farouk
Mirza Ashraf
Atif Khan
Business Tax Advisory
Ahmed Abdullah
Hosam Abdulkareem
Esraa Albuti
Ahmed Aqeel
Babar Ali
+966 (11) 215-9876
Mobile: +966 505-188-328
Email: asim.sheikh@sa.ey.com
+966 (11) 215-9807
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Email: imran.iqbal@sa.ey.com
+966 (11) 215-9864
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+966 (11) 215-9898
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+966 (11) 215-9439
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+966 (11) 215-9805
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+966 (11) 215-9443
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+966 (11) 260-5661
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Email: ahmed.h.akeel@sa.ey.com
Mobile: +966 593-72-2275
Email: babar.ali@sa.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Barry Magill
+971 2417-4554 (resident in Abu Dhabi)
Billy Thorne
Email: barry.magill1@ae.ey.com
+966 (11) 260-5217
Mobile: +966 507-966-335
Email: billy.thorne@sa.ey.com
International Tax and Transaction Services – Transfer Pricing
Ricardo Cruz
+966 (11) 260-5680
Mobile: +966 554-671-694
Email: ricardo.m.cruz.sanchez@sa.ey.com
Indirect Tax
Peter Dylewski
Mohammed Bilal Akram
EY Law
Reema A Aref
A. At a glance
+966 (11) 215-9858
Mobile: +966 534-340-024
Email: peter.dylewski@sa.ey.com
+966 (11) 215-9858
Mobile: +966 580-507-766
Email: mohammedbilal.akram@sa.ey.com
+966 (11) 528-4035
Mobile: +996 (55) 699-6065
Email: reema.a.aref@sa.ey.com
Corporate Income Tax Rate (%)
Engaged in Natural Gas
and Hydrocarbon
Companies 50 to 85 (a)
Companies 20
Gains Tax Rate (%) 20
Tax (%) (b)
Net Operating Losses (Years) Carryback 0
Carryforward Unlimited (c)
(a) For further details, see Section B.
(b) For further details and a complete listing of withholding taxes, see Section B. The withholding tax rates in Saudi Arabia range from 5% to 20%.
(c) For further details, see Section C.
B. Taxes on corporate income and gains
Income tax. Income tax is assessed on profits of the following:
• A resident capital company with respect to shares owned directly or indirectly by persons operating in oil and hydrocarbon production, with the exception of shares directly or indirectly owned by persons engaged in the production of oil and hydrocarbons in resident capital companies that are listed in the Saudi Stock Exchange (Tadawul) and the shares owned directly and indirectly by these companies in capital companies
• A resident capital company (only on profits attributable to shares owned by non-Saudi or non-Gulf Cooperation Council [GCC] shareholders; see below)
• A resident non-Saudi or non-GCC natural person who carries on a business in Saudi Arabia
• A nonresident company that carries on business in Saudi Arabia through a permanent establishment
• A nonresident without a permanent establishment in Saudi Arabia that has taxable income from sources in Saudi Arabia (tax is assessed through withholding tax)
• A person engaged in the field of natural gas investment
• A person engaged in the production of oil and hydrocarbon materials
Partners in partnerships (that is, general partnerships, unincorporated joint ventures and limited partnerships) are subject to tax rather than the partnerships themselves.
For income tax purposes, non-Saudis do not include citizens (nationals) of countries that are the members of the GCC. Members of the GCC are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The share of profits attributable to interests owned by GCC nationals in a company is subject to Zakat (see Section D). The share of profits attributable to interests owned by non-GCC nationals in that company is subject to income tax.
Rates of tax. All companies, including companies engaged in the business of natural gas investment activity, are taxed at a rate of 20%.
Companies engaged in the production of oil and other hydrocarbons (upstream business; also, see next paragraph) are subject to tax on their net profit at rates ranging from 50% to 85%. The slab rate is determined based on the capital investment of the company. The following are the tax rates.
Total capital investment of company
More than SAR375 billion (USD100 billion) 50
SAR300 billion to SAR375 billion (USD80 billion to USD100 billion) 65 SAR225 billion to SAR300 billion (USD60 billion to USD80 billion) 75 Not more than SAR225 billion (USD60 billion) 85
Companies engaged in the production of oil and other hydrocarbons should segregate the downstream businesses from the oil and hydrocarbons production activities by carrying out the downstream business through an independent legal entity within five years, effective from 1 January 2020 (period of segregation of activities). Downstream business is all works carried out after the production of oil and hydrocarbons, which includes, but is not limited to, refining, transportation and marketing of oil and hydrocarbons products. The income tax rate on the tax base from downstream business is 20%. Complex rules apply for the calculation of income tax of companies engaged in the production of oil and other hydrocarbons (due to segregation of upstream and downstream activities), and it is suggested that specific advice be obtained.
Saudi Regional Headquarters Program. On 5 December 2023, Saudi Arabia announced a 30-year corporate income tax and withholding tax holiday applicable to the regional headquarters (RHQ) of multinational companies in Saudi Arabia. Following this announcement, the Zakat, Tax and Customs Authority (ZATCA) published the RHQ Tax Rules on 16 February 2024 as well as more detailed guidelines on 15 April 2024, which clarify certain RHQ tax matters, including the following:
• RHQs will be eligible to benefit from tax incentives if the criteria set by the Ministry of Investment of Saudi Arabia (MISA) are met.
• RHQs need to comply with the economic substance requirements prescribed by the ZATCA. Otherwise, penalties and potential revocation of tax incentives may be imposed. RHQs shall submit an annual report using the form that will be prescribed by the ZATCA.
• 10% of the underpaid tax if the delay is more than 30 and not more than 90 days from the due date
• 20% of the underpaid tax if the delay is more than 90 and not more than 365 days from the due date
• 25% of the underpaid tax if the delay is more than 365 days from the due date
An advance payment on account of tax for the year is payable in three installments. The installments are due by the end of the sixth, ninth and 12th months of the tax year. Each installment of advance payment of tax is calculated in accordance with the following formula:
25% x (A – B)
For the purposes of the above calculation, “A” equals the taxpayer’s liability as per the tax declaration for the preceding year and “B” equals tax withheld at source for the taxpayer in the preceding year.
A taxpayer is not required to make advance tax payments in a year if the tax liability for the preceding year was less than SAR2 million.
A delay fine of 1% for each 30 days of delay after the lapse of 30 days from the due date of tax until the date the tax is paid.
Dividends. Dividends paid to nonresident shareholders are subject to withholding tax at a rate of 5% (see Withholding tax). After-tax profit remittances of a branch (permanent establishment) are also considered dividends under the Saudi Income Tax Regulations.
Dividend income or bonus shares earned by a resident company on its investments in a resident or a nonresident capital company is exempt from tax if the ownership in the investee company is 10% or more and if the investment is held for a period of one year or more.
Foreign tax relief. Relief is not provided for foreign taxes paid (unless covered by a double tax treaty).
C. Determination of tax payable
Taxable profits. Tax liabilities are assessed by the ZATCA on the basis of the audited financial statements, as adjusted for tax purposes. In certain cases (for example, permanent establishments of nonresidents that do not maintain books of accounts in Saudi Arabia, foreign airlines, and foreign freight and land and marine transport companies operating in Saudi Arabia), tax may be assessed under the “presumptive basis.” Under the presumptive basis, no financial statements are presented, and the tax liability is assessed on deemed profit calculated at rates specified in the tax regulations.
Nondeductible expenses. Certain expenses are not deductible in calculating taxable profit, including the following:
• Expenses not connected with the earning of income subject to tax
• Payments or benefits to a shareholder, a partner or their relatives if they constitute salaries, wages, bonuses or similar items or if they do not represent an arm’s-length payment for property or services
years following the change, unless the company continues with the same business activities.
D. Other significant taxes
The following table summarizes other significant taxes.
Other significant taxes Rate (%) Zakat; a religious levy imposed on Saudi/GCC shareholders’ share in Saudi Arabian companies; Zakat is calculated and paid by a Saudi Arabian resident capital company with respect to the share of a Saudi/GCC individual or corporate shareholders; Zakat is levied on the Zakat base of a resident capital company; the Zakat base is broadly calculated as capital employed (for example, share capital and retained earnings) that is not invested in fixed assets, long-term investments and deferred costs, as adjusted by net results of operations for the year that is attributable to Saudi or GCC shareholders; complex rules apply to the calculation of Zakat liabilities, and it is therefore suggested that Zakat payers seek specific advice suited to their circumstances; in 2024, the New Zakat Regulation (NZR) was issued, which is applicable for years commencing from 1 January 2024; Zakat is assessed between a minimum and maximum range as defined in the NZR Zakat is calculated at 2.578% of the net assessable funds or the Zakat base (in case the Zakat payer uses the Gregorian year to prepare its accounts)
E. Miscellaneous matters
Supply and erection contracts. Profits from “supply only” operations to Saudi Arabia are exempt from income tax (whether the contract is made inside or outside Saudi Arabia) because the supplier trades “with” but not “in” Saudi Arabia. The net profits of operations that include supply, erection or maintenance are subject to tax, and the contractors are required to register with the ZATCA and submit a tax declaration in accordance with the tax regulations.
The following information must generally be submitted in support of the cost of imported materials and equipment:
• Invoices from the foreign supplier
• Customs clearance document
• If the supplying entity is the head office of the Saudi Arabian branch, a certificate from the external auditor of the head office confirming that the cost claimed is equal to the international market value of the equipment supplied (usually the contracted selling price)
Subcontractors. Payments to subcontractors, reported by a taxpayer in its tax return, are subject to closer scrutiny by the ZATCA. The taxpayer is required to withhold tax due on payments to nonresident subcontractors and to deposit it with the ZATCA unless the taxpayer can provide a tax file number or tax clearance certificate as evidence that such subcontractor is settling its tax liability.
Tax is not required to be withheld from payments to subcontractors resident in Saudi Arabia. However, government procurement regulations provide for the retention of 10% of the contract value until the completion of the statutory formalities including the submission of the certificate from the ZATCA.
Imports from head office and affiliates. A Saudi “mixed” entity (with Saudi/GCC shareholders and non-Saudi/non-GCC shareholders) is expected to deal on an arm’s-length basis with its foreign shareholders or any company affiliated with its foreign shareholders. The company may be required to submit to the ZATCA a certificate from the seller’s auditors confirming that the materials and goods supplied to the Saudi Arabian company were sold at the international market price prevailing at the date of dispatch. This requirement also applies to foreign branches importing materials and goods from the head office for the fulfillment of their Saudi contracts.
Transfer pricing. Transfer pricing (TP) bylaws, which were issued in February 2019, contain mandatory legislative provisions regarding transactions among related parties and documentation requirements following the Base Erosion and Profit Shifting (BEPS) Action 13 standard. They also prescribe TP methods and establish other administrative procedures, including the submission of related-party disclosure forms and TP affidavits.
The TP bylaws require Saudi Arabian entities and permanent establishments, including branches of foreign companies that are subject to the Corporate Income Tax Law, which includes mixed entities in Saudi Arabia (those that pay both corporate tax and Zakat), to maintain a TP Master File and Local File if the aggregate arm’s-length value of the transactions between related parties exceed the minimum threshold of SAR6 million. The
taxpayers, including mixed entities, are also required to file the TP disclosure form together with the corporate income tax return and submit a TP affidavit issued by a licensed accountant in Saudi Arabia.
In addition, entities that are members of multinational enterprise groups (either Zakat or corporate income tax taxpayers) with consolidated group revenue exceeding SAR3.2 billion during the year immediately preceding the current reporting year must submit a Country-by-Country (CbC) report within 12 months after the end of the group’s fiscal year. They can also submit the CbC report at the location of their headquarters instead of Saudi Arabia or other jurisdictions in which they operate if there is an active CbC exchange mechanism between Saudi Arabia and these countries. Moreover, these qualifying multinational enterprises also need to file a CbC reporting notification together with their annual tax return and in the Automatic Exchange of Information (AEOI) portal of the Saudi Arabian tax authority within 120 days after the end of the fiscal year.
On 7 April 2023, the ZATCA announced the issuance of the Decision of the Board of Directors of the Zakat, Tax and Customs, approving changes that will include Zakat payers within the scope of the Saudi Arabian TP bylaws. The new requirements for Zakat payers will be implemented in two phases in accordance with the amended TP bylaws, which have been recently published. Which of the two phases to apply will depend on the Zakat payers’ aggregate value of related-party transactions during the year. Zakat payers are expected to comply with these TP requirements for the financial years starting on or after 1 January 2024, so that all related-party transactions are conducted on an arm’s-length basis. Among the relevant changes, the amended TP bylaws will also include provisions for entering into advance pricing agreements (APAs) negotiated with the ZATCA if requested by income tax and Zakat payers.
Mutual agreement procedure. ZATCA published the Mutual Agreement Procedure (MAP) Taxpayer Guidance (MAP Guidance) under which taxpayers in Saudi Arabia may choose to initiate MAP requests to relieve double taxation or resolve treatybased tax disputes in a timely manner, if they believe that tax was not applied in accordance with the relevant treaty.
The MAP Guidance was issued to facilitate access to the MAP and includes information on how a MAP request should be initiated, to whom it should be presented and what information should be included in the request. This is in line with Saudi Arabia’s commitment to the BEPS Action 14 minimum standard as a member of the BEPS Inclusive Framework.
Electronic invoicing (e-invoicing). Saudi Arabia has begun implementing e-invoicing, which is intended to improve the efficiency of the filing process for taxpayers and increase compliance with tax laws and regulations. Businesses are required to implement the e-invoicing process in two phases. Phase 1, referred to as the generation phase, started on 4 December 2021, and is now live. Phase 1 mandates the generation of e-invoices and e-notes, including provisions related to their processing and recordkeeping. Phase 2, referred to as the
integration phase, is effective from 1 January 2023, and is being implemented in waves based on taxpayer revenues. Phase 2 mandates the integration of the taxpayer’s system with the tax authority, along with the transmission of e-invoices and e-notes for validation.
F. Tax treaties
The table below shows the withholding rates for dividends, interest and royalties provided under Saudi Arabia’s double tax treaties that are in force and effective as of May 2024.
Certain other tax-exempting provisions (for example, for sovereign wealth funds) are contained in certain protocols to Saudi tax treaties.
To benefit from the reduced rates or exemptions under double tax treaties, additional conditions should be met (for example, the recipient is required to be the beneficial owner of the related gain).
The treaty benefits are not applicable automatically and should be claimed from the ZATCA in each particular case by submitting the Q7-B form and other supporting documents (for example, a tax residence certificate). The taxpayer may claim the treaty benefit up front and follow double tax treaty rules, or the taxpayer may pay the tax under domestic income tax law and then claim a refund from the ZATCA.
5/8 (h)
Austria
0/5 (a) 0/5 (a)(b) 10
Azerbaijan 5/7 (c) 0/7 (a)(d) 10
Bangladesh 0/10 (a) 0/7.5 (a) 0/10 (a)
Belarus 0/5 (a) 0/5 (a) 10
Bulgaria 0/5 (a) 0/5 (a) 5/10 (h)
China Mainland 0/5 (a) 0/10 (a)(e) 10
Cyprus 0/5 (a)(i) 0 5/8 (h)
Czech Republic 5 0 10
Egypt 0/5/10 (a)(f) 0/10 (a) 0/10 (a)
Ethiopia 5 0/5 (a) 7.5
France 0 0 (g) 0
Gabon 5 7.5 10
Georgia 0/5 (a) 0/5 (a) 5/8 (h)
Greece 0/5 (a) 0/5 (a) 0/10 (a)
Hong Kong 5 0 5/8 (h)
Hungary 5 0 5/8 (h)
India 5 0/10 (a) 10
Ireland 0/5 (a)(i) 0 5/8 (h)
Italy 5/10 (j) 0/5 (a) 10
Japan 5/10 (k) 0/10 (a)(e) 5/10 (h)
Jordan 5 0/5 (a) 7
Kazakhstan
0/5 (a) 0/10 (a) 0/10 (a)
Korea (South) 5/10 (j) 0/5 (a)(l) 5/10 (h)
Kosovo 0/5 (x) 0/5 (a)(l) 5/10 (h)
Kyrgyzstan 0 0 7.5
Latvia 0/5 (a)(i) 0/5 (a) 5/7 (h)
5 0/5 (a) 8
(h)
5 0 5/7 (h) Mexico 0/5 (a) 0/5/10 (a)(n) 10
Morocco 5/10 (o) 0/10 (a) 10
Netherlands 5/10 (o) 0/5 (a) 7
North Macedonia 5 0/5 (a)(m) 10 Pakistan 5/10 (p) 0/10 (a) 10 Poland 5 0/5 (a)(m) 10 Portugal 5/10 (q) 0/10 (a)(m) 8 Romania 0/5 (a) 0/5 (a)(b) 10 Russian Federation 0/5 (a) 0/5 (a)(m) 10 Singapore 0/5 (a) 0/5 (a) 8
South Africa 0/5/10 (a)(o) 0/5 (a) 0/10 (a)
Spain 0/5 (i) 0/5 (a) 8
Sweden 5/10 (r) 0 5/7 (h)
5/15 0/5 5/7
0 0/7.5 (a) 15
12.5 10 4/10 (y) Tajikistan 0/5/10 (a)(j) 0/8 (a) 8
Tunisia 0/5 (a) 0/2.5/5 (a)(s) 0/5 (a)
Türkiye 5/10 (f)(t) 0/10 (a) 10
Turkmenistan 10 0/10 (a) 10
(a)(f) 0/10 (a) 10
United Arab Emirates 0/5 (a) 0 0/10 (a)
United Kingdom 515 (u) 0 5/8 (h)
Uzbekistan 0/7 (a) 0/7 (a) 0/10 (a)
Venezuela 5 0/5 (a)(l) 8
Vietnam 5/12.5 (v) 0/10 (a) 7.5/10 (w) Non-treaty jurisdictions 5 5 15
(a) The 0% rate generally applies to payments to government bodies.
(b) The 0% rate applies to income from debt claims paid on loans granted, insured or guaranteed by a public institution for the purposes of promoting exports.
(c) The 5% rate applies to dividends if the beneficial owner is a government of the other contracting state, the central bank of the other contracting state or any entity that is wholly owned by the government of the other contracting state or that has invested in the capital of the company paying the dividends at least USD300,000 or its equivalent in any other currency.
(d) The 0% rate applies to income from debt claims if the loan agreements were approved by the government.
(e) The 0% rate applies to income from debt claims that are indirectly financed by government bodies.
(f) The 5% rate applies to dividends paid to a shareholder (other than the partnership) that is the beneficial owner and directly owns at least 20% of the shares of the company paying the dividends.
(g) The 0% rate applies to income from debt claims paid by a national of either contracting state to a bank or financial institution that has the nationality of either contracting state.
(h) The 5% rate applies to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment.
(i) The 0% rate applies to dividends paid to a shareholder (other than the partnership) that is the beneficial owner and directly owns at least 25% of shares of the company paying the dividends.
(j) The 5% rate applies to dividends paid to a shareholder (other than the partnership) that is the beneficial owner and directly owns at least 25% of shares of the company paying the dividends.
(k) The 5% rate applies to dividends paid to a shareholder that is the beneficial owner and owns directly or indirectly, during the period of 183 days ending on the date on which entitlement to the dividends is determined, at least 10% of the voting shares or of the total issued shares of the company paying the dividends and the company paying the dividends is not entitled to a deduction for dividends paid to its beneficiaries in computing its taxable income in Japan.
(l) The 0% rate applies to income from debt claims that are guaranteed or financed by government bodies.
(m) The 0% rate applies to income from debt claims if the payer of such income is a government body.
(n) The 5% rate applies to income from debt claims paid to financial entities or pension funds.
(o) The 5% rate applies to dividends paid to a shareholder (other than the partnership) that is the beneficial owner and directly owns at least 10% of shares of the company paying the dividends.
(p) The 5% rate applies to dividends paid to either a company or an entity wholly owned by the government, if the recipient is the beneficial owner.
(q) The 5% rate applies to dividends if the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends or if the beneficial owner is, in the case of Saudi Arabia, the state, a political or administrative subdivision or a local authority thereof (including the Saudi Arabian Monetary Agency), or a wholly owned state entity and, in the case of Portugal, the state, a political or administrative subdivision or a local authority thereof, or the Central Bank of Portugal.
(r) The 5% rate applies to dividends if the beneficial owner is a company (other than a partnership) that holds at least 10% of the voting power or voting shares of the company paying the dividends.
(s) The 2.5% rate applies to interest paid to banks.
(t) The 5% rate applies to dividends paid to government bodies.
(u) The 15% rate applies to dividends if qualifying dividends are paid by a property investment vehicle; in all other cases, the 5% rate applies to dividends.
(v) The 5% rate applies to dividends paid to a shareholder (other than a partnership) that is the beneficial owner and owns directly at least 50% of the capital of the company paying the dividends or has invested USD20 million or more or any equivalent currency in the capital of the company paying the dividends.
(w) The 7.5% rate applies to royalties paid for the rendering of services or assistance of a technical or managerial nature.
(x) The 0% rate applies if the payer of dividends is a resident of Kosovo.
(y) The 4% rate applies to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment.
Saudi Arabia has signed tax treaties with Iraq, Mauritania, Gambia, the Slovak Republic and Sri Lanka. These treaties were not yet in force as of May 2024.
Saudi Arabia is negotiating tax treaties with Barbados, Belgium, Bosnia and Herzegovina, Botswana, Côte d’Ivoire, Croatia, Ghana, Guernsey, Guinea-Bissau, Jersey, Lebanon, Mauritius, Moldova, New Zealand, Nigeria, San Marino, Serbia, Seychelles and Sudan.
Saudi Arabia has also entered into limited tax treaties with the United Kingdom, the United States and certain other countries for the reciprocal exemption from tax on income derived from the international operation of aircraft and ships.
Saudi Arabia signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 18 September 2018, submitting its preliminary list of reservations and notifications (MLI positions). Among these are the minimum standards that must be applied by all signatories of the MLI, including the following:
• Adoption of a new preamble that updates the objectives of tax treaties to state that a treaty should not be used to “create opportunities for non-taxation or reduced taxation through tax evasion or avoidance” (Article 6 of the MLI)