Income Tax Law

The Income Tax Law gathers rules and regulatory procedures for income tax within the Kingdom of Saudi Arabia. It was issued on March 6, 2004, and specifies taxable persons.

The income Tax Law specifies Taxable individual and defines the concept of residency, stipulating that a natural person is considered a resident in the Kingdom for the tax year if they meet either of the following conditions: having a permanent residence in the Kingdom and residing in it for a total of at least thirty days in the tax year, or residing in the Kingdom for at least 183 days during the tax year. The law also stipulates that a company is considered a resident of the Kingdom if either of the following conditions is met: being established under the Companies Law or having its headquarters in the Kingdom.

The law defines taxable income as the gross income, including all revenues, profits, and gains, regardless of their type or form of payment, arising from the conduct of business, including capital gains and any incidental income, less exempt income. Furthermore, income derived from natural gas investment activities is defined as the total income realized from the sale, exchange, or conversion of natural gas, its liquids, and gas condensates, including sulfur and other products, as well as any other income obtained by the taxpayer from incidental or non-operational income related to its primary activity, regardless of its type or source, including income realized from the utilization of excess capacity in one of the facilities of its natural gas investment activities.

The law stipulates that, except land, depreciation may be deducted from the taxpayer’s assets of a tangible and intangible consumable nature, the value of which decreases due to use, damage, or obsolescence, and all or part of which is used to generate taxable income, and which retain value after the end of the tax year.