Saudi Arabia's corporate income tax system is a matter that needs to be paid close attention to for Chinese companies planning to invest in Saudi Arabia. Here, I will try to analyze the corporate income tax policy in Saudi Arabia in as much detail as possible.
First of all, we need to understand that Saudi Arabia has a relatively special tax system.
In this country, individuals and businesses are required to pay a religious tax called zakat, which is taxed at a rate of $2 on taxable income5%。However, domestic-funded enterprises in Saudi Arabia, that is, companies set up by Saudis, are not subject to corporate income tax. This is undoubtedly a huge tax advantage for Saudi companies.
However, for foreign investors, the situation is different. Companies set up in Saudi Arabia by foreign investors are subject to corporate income tax. The corporate income tax rate is generally 20% and applies to limited liability companies, joint-stock companies with foreign investor shareholdings, as well as foreign natural persons doing business in Saudi Arabia or foreign enterprises or natural persons who have established a permanent establishment in Saudi Arabia to engage in business activities. This is something that Chinese companies that intend to invest in Saudi Arabia need to pay special attention to.
So, what if a Chinese investor sets up a joint venture with a Saudi investor? How is the corporate income tax calculated for such companies? Generally, such companies will be subject to corporate income tax in proportion to the foreign investor's shareholding.
For example, if a Chinese investor holds 30% of the shares in a Saudi Sino-Saudi joint venture, the tax base of the resident company is 30% of the net profit, and the corresponding part of the Saudi investor's share ratio is not taxed. If it is a wholly Chinese-owned company in Saudi Arabia, i.e. a company with 100% ownership by foreign investors, it is required to pay corporate income tax at 20% of its total net profit.
In addition, it should be noted that Saudi Arabia imposes higher income taxes on some special industries.
For example, companies engaged in natural gas investment need to pay 30% income tax; Companies engaged in the production of petroleum and hydrocarbon materials are subject to income tax of up to 85%. Therefore, when Chinese companies consider investing in Saudi Arabia, they also need to assess the tax costs according to their business sector.
Overall, Saudi Arabia's corporate income tax system can be challenging for foreign investors. However, as long as we fully understand and make reasonable use of Saudi Arabia's tax policy, we can still find our own development space in this market. Hope the above information can be helpful to everyone.
This article was carefully compiled by the Arab-Chinese Industrial Research Institute. The Middle East Legal Center of the A-China Industrial Research Institute has brought together an excellent team of lawyers from China's top law firms, and has joined forces with legal elites in the Middle East to provide comprehensive and professional Middle East legal services for Chinese enterprises.
Focusing on the broad business opportunities in the Middle East, the A-China Industrial Research Institute provides one-stop landing services for the all-round development of Chinese enterprises in the Middle East, covering business consulting, legal affairs, company registration, financial and tax planning, human resource allocation, property leasing management, investment and financing and other fields. Our goal is to be a strong backing for Chinese companies to expand in the Middle East, helping you to take root, grow and prosper in this hot land.