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WHAT ARE THE TYPES OF COMPANIES ONE CAN SET UP IN SAUDI ARABIA?
According to the Companies Law, a company has been defined as a contract
pursuant to which each of two or more persons undertake to participate,
in an enterprise aiming at profit, by offering in specie or as work a
share, for sharing in the profits or losses resulting from such enterprise.
Under article 2 of the Companies Law, the companies can take any of the
following forms: General Partnerships, Limited Partnerships, Joint Ventures,
Corporations, Partnerships Limited by Shares and Limited Liability Partnerships.
In the case of a joint venture, a company's memorandum of association
and any amendment thereto must be recorded in writing in the presence
of a registrar. Otherwise, such memorandum or amendment shall not be valid
vis-à-vis third parties. With the exception of joint ventures,
any company incorporated in accordance with these regulations shall establish
its head office in the Kingdom. It shall be deemed to have Saudi nationality,
but this shall not necessarily entail its enjoyment of such rights as
may be restricted to Saudis.
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WHAT ARE THE REQUIRED DOCUMENTS FOR NEW INVESTMENT LICENCE APPLICATIONS?
The required documents are completed and signed license application by
the investor or his authorised representative. A certified authorisation
attested by the Chamber of Commerce indicating the name and identity of
the person authorised to follow up and finalise the licensing procedures
on behalf of the investor. A Photocopy of
1 - Passport for foreign investors; and
2 - Civil Record (I.D. Card) for Saudi investors.
Investors resident in the Kingdom of Saudi Arabia must present the following
documents:
Photocopy of the Iqama
No objection letter from the applicant’s current sponsor stating
his approval to relinquish his sponsorship to the licensed project attested
by the Chamber of Commerce.
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HOW MUCH TIME DOES IT TAKE TO COMPLETE THE LICENSING PROCESS?
You should be able to finish the licensing process within 30 days.
As an investor, I am keen to know briefly about the tax system?
The Kingdom of Saudi Arabia has a very liberal tax system; there are few
taxes payable by an individual or a company and they are also at very
low rates.
Zakat
The Zakat (a form of tithe) is paid annually by Saudi individuals and
companies within the provisions of Islamic law as laid down by Royal Decree
No. 17/2/28/8634 dated 29/6/1370 H. (1950). The Zakat is an annual flat
rate of 2.5 percent of the assessable amount.
Personal Income Tax
For individual employees, both national and expatriate, there is no income
tax in the Kingdom. Self-employed expatriates such as doctors, accountants,
lawyers, etc pay taxes on their net annual income at the following rates:
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NET INCOME (per year)
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TAX RATE (percent)
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First 6,000
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Exempted
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From SR 6,001 - 10,000
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5
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From SR 10,001 - 20,000
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10
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From SR 20,001 - 30,000
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20
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Over SR 30,000
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30
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A slab system is employed to calculate such taxes.
Tax on Business Income
A company, under the tax regulations, means a company or partnership having
material gain as the basic objective. The taxable incomes of companies
include:4 Profits of a foreign company; and shares of non-Saudi sleeping
partners in the net profits of partnership companies. All legitimate business
expenses and costs, including business losses and depreciation, are deductible
in computing net profits. Any reasonable method of depreciation may be
adopted by the company, but thesame must be adhered to from year to year.
Capital gains are included in the profits of the company. The following
tax rates, on a slab basis, are now in force:
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NET PROFIT LEVEL
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TAX RATE (percent)
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First SR 100,000
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25
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From SR 100,001-500,000
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35
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From SR 500,001-1,000,000
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40
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Over SR 1,000,000
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45
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Income tax is charged at different rates for companies engaged in the
production of petroleum and hydrocarbons in the Kingdom.
Every company is required to submit a financial statement on an official
form and to pay the tax not later than the 15th day of the third month
of the year following the Saudi Arabian fiscal year, which commences on
the 10th of Capricorn (31 December).
For the purpose of
the State bearing 15% of taxes imposed on companies' profits that exceed
one hundred thousand Riyals, this percentage shall be calculated out of
the tax bracket values provided for in Article (11) dated 21/1/1370(H).
This shall include all capital companies subject to tax with the exception
of companies operating in the field of oil, gas and hydrocarbon production.4
The State's bearing of this tax percentage is limited only to profits
which exceed one hundred thousand Riyals per year. Accordingly, this shall
be carried out when collecting taxes from the capital companies, as follows:
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First bracket
: 1 - 100,1000 SR.
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value 25%
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Second Bracket:
100,001 - 500,000 |
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value 20% in
lieu of 35% |
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Third bracket
: 500,001 - million Riyals |
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value 25% in
lieu of 40% |
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Fourth
bracket: Over million Riyals |
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value
30% in lieu of 45% |
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Net losses which may
be carried forward shall be determined by the legally amended operational
losses without regard to book losses. Operational losses shall mean expenses
which are legally deductible in accordance to Article 14 of the Tax Law
and which are in excess of the income subject to tax during the taxable
year.
All subjects who keep
regular accounts and who are subject to Income Tax pursuant to the aforementioned
Royal Decree shall benefit from the principle of reallocating losses.
Subjects exempted
from tax shall not benefit from the principle of subsequent to the issuance
of the aforementioned Resolution of the Council of Ministers and shall
not include the accounts of previous fiscal years whether such accounts
were submitted to the department or not, or by tax Dispute Committee or
Appellate Committees.
This Resolution is
applicable on fiscal years which end at dates that are subsequent to the
issuance of the aforementioned Resolution of the Council of Ministers
and shall not include the accounts of previous fiscal whether such accounts
were submitted to the department or not, or by Tax Dispute Committees
or Appellate Committees.
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DOING BUSINESS
WITH SAUDI ARABIA
