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Law of the General Investement Authority
 Introduction
JEDDAH, 29 April 2003 — Saudi businessmen have welcomed yesterday’s Shoura Council decision to cut taxes on profits of foreign companies from 45 percent to a maximum of 25 percent, saying the move will boost foreign investment in the Kingdom.
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The Shoura approved the 69-article law and will forward it to the Council of Ministers” for endorsement, Hamoud Al-Badr, secretary-general of the Council told reporters.
The 120-member Council in January rejected an article in the legislation suggesting an income tax levy of around 10 percent on the salaries of some seven million expatriate workers earning more than SR3,000 ($800) a month.
But the law, which becomes effective after approval from the Cabinet, also stipulates a maximum of 85 percent tax on gas and hydrocarbon projects, a field almost totally off-limit to foreign investors.
The Kingdom has been negotiating with eight oil giants the implementation of three major gas projects requiring initial investments of some $25 billion. Talks have reached final stages on two projects while the third has been temporarily shelved for further economic assessment.
The new legislation offers certain tax exemptions, especially for spending on research, development and geological surveys, and allows losses to be carried over from one year to the next.
In joint ventures with Saudi partners, taxes are imposed on the foreigners’ share. Saudi and Gulf Arab businesses already pay zakat, which works out to 2.5 percent of a firm’s annual net worth.
International airlines operating in the Kingdom will pay an annual tax of five percent on sales of tickets, freight and mail.
Saudi Arabia is projecting a $10.4-billion budget deficit for fiscal 2003, but economists predict the deficit will be wiped out due to high oil prices. The Saudi Arabian General Investment Authority has licensed 1,782 industrial, agricultural and service projects worth SR51 billion ($13.6 billion) since its inception in 2000.
New Income Tax Act for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals.
In its weekly session held on 20/11/1424 (12/1/2004), The Cabinet endorsed a new income tax law for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals doing business in the Kingdom.
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New Taxation Law
The main guidelines of the new taxation law are as follows:
First:
The subject Individuals companies:
- Non-Saudi partner’s shares in a Saudi-based association of capital.
- Non-Saudi legal resident who runs business in the Kingdom.
- Non-resident who runs business in the Kingdom through a permanent facility.
- Non-resident who earns other income from sources in the Kingdom.
- A person who runs business in the field of natural gas.
- A person who runs business in the field of oil and hydro carbonic materials production.
Second:
The activity meant and covered in this law shall stand for all forms of trade, vocational or handcraft activities, or any similar activity aimed at deriving profit, including movable and immovable properties.
Third:
The Law fixed the rates of tax as follows:
- 20% tax rate per unit for each of:
- Saudi-based association of capital.
- Non-resident legal persona who runs business.
- Non-resident persona who runs business in the Kingdom through a permanent enterprise.
- Tax rate per unit for those designated to invest in the field of natural gas only is 30%.
- Tax rate per unit for those designated to run business in the field of producing oil and hydro carbonic materials is 85%.
Fourth:
The Law will come into effect after 90 days of its publication in the official gazette, when it will nullify the current income tax law which was issued under
the Royal Decree No 3321 dated 21/1/1371 and its subsequent amendments.
New Income Tax Act for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals.
In its weekly session held on 20/11/1424 (12/1/2004), The Cabinet endorsed a new income tax law for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals doing business in the Kingdom.
Saudia-Online.com
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References:
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