Saudi Arabia Tax Guide for Foreign Companies: CIT, VAT, Zakat, and WHT Explained

Saudi Arabia does not have a personal income tax. That gets misread as "Saudi Arabia has no taxes." It doesn't. For a foreign company operating in the Kingdom, the tax picture is quite specific — and getting it wrong can mean unexpected liabilities that dwarf what a consultant would have cost.

This guide explains every tax a foreign company faces in Saudi Arabia, who it applies to, at what rate, and when it kicks in.

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The Fundamental Split: Who Pays What

Saudi Arabia's tax system is built around one central distinction:

Ownership	Tax Obligation
Saudi nationals and GCC nationals	Pay Zakat on their equity share
Non-Saudi/non-GCC parties	Pay Corporate Income Tax (CIT) on their equity share

A 100% foreign-owned LLC pays CIT only. A Saudi-foreign joint venture pays Zakat on the Saudi portion and CIT on the foreign portion — in proportion to ownership.

This is not intuitive if you come from a jurisdiction where tax is based on the company, not the owner. In Saudi Arabia, the ownership structure directly determines the tax regime.

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Corporate Income Tax (CIT)

Rate: 20% of net taxable income
Applies to: Non-Saudi/non-GCC ownership share of company profits
Authority: ZATCA

For a 100% foreign-owned entity, CIT applies to all taxable income. The rate is a flat 20%. CIT is assessed on net income (revenue minus allowable expenses), not gross revenue.

Filing obligations:

• Annual CIT return filed with ZATCA
• Return due within 120 days of fiscal year end
• Advance tax payments (zakat installments) may be required during the year

What's taxable income?

Business profits attributable to the Saudi operations. For a Saudi subsidiary or branch, this is the income generated from Saudi activities after deducting allowable business expenses.

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Value Added Tax (VAT)

Rate: 15%
Registration threshold: SAR 375,000 (mandatory); SAR 187,500 (voluntary)
Authority: ZATCA

Saudi Arabia introduced VAT in 2018 at 5% and increased it to 15% in 2020. Most goods and services supplied in Saudi Arabia are subject to VAT at 15%.

When you must register:

You must register for VAT if your taxable revenue in a 12-month period exceeds SAR 375,000. Voluntary registration is available from SAR 187,500.

Don't wait until you exceed the threshold to apply — ZATCA registration takes 5-7 working days, and operating above the threshold without registration exposes you to retroactive VAT liability plus penalties.

VAT-exempt and zero-rated categories:

• International goods transportation (zero-rated)
• Some financial services (exempt)
• Residential property rental (exempt)
• Healthcare services (in certain circumstances)

FATOORA — e-invoicing:

All VAT-registered entities must generate electronic invoices through the FATOORA system. Phase 2 (integration with ZATCA's system for real-time invoice reporting) has been rolling out to businesses in waves since 2023. Non-compliant invoicing carries penalties.

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Zakat

Rate: 2.5% of the Zakat base
Applies to: Saudi national and GCC national-owned equity share
Authority: ZATCA

Zakat is an Islamic business levy applicable to the Saudi/GCC ownership portion of companies. For a 100% foreign-owned entity, Zakat does not apply — you pay CIT instead.

The Zakat base is not simply profit. It is calculated based on specific rules involving adjusted equity, loans, and deductible items — it is not the same as the CIT taxable income base. Companies with Saudi partners need a specialist advisor to calculate the correct Zakat base.

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Withholding Tax (WHT)

Applies to: Payments made by Saudi-resident companies to non-residents
Authority: ZATCA
Who pays: The Saudi company withholds and remits — but the economic burden is on the foreign recipient

WHT is one of the most commonly missed obligations for foreign companies with Saudi clients. When a Saudi company pays a non-resident for services, royalties, technical fees, or management fees, WHT must be withheld at source.

WHT rates (standard domestic rates — may be reduced by DTA):

Payment type	Domestic WHT rate
Services	5%
Technical services	5%
Royalties	15%
Management fees	20%
Dividends	5%
Interest	5%

Note: If your home country has a Double Taxation Agreement (DTA) with Saudi Arabia, the WHT rate may be lower. Saudi Arabia has 57 DTAs in force. Whether your DTA reduces a specific payment type's WHT depends on the specific treaty.

What this means for foreign companies:

If you're a foreign tech company providing SaaS to Saudi companies, your Saudi client is required to withhold WHT on your invoices (typically 5% for services or 15% for royalties). If your Saudi client doesn't withhold and you're not filing in Saudi Arabia, you and your client are both at risk.

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Permanent Establishment (PE) Risk

Withholding tax applies when there's no PE. When there is a PE, full CIT applies on net profits instead of WHT on gross payments — which can be more expensive.

A PE is triggered by:

• Fixed place: A permanent office, server, or place of business
• Agency: An agent in Saudi Arabia who habitually concludes contracts on your behalf
• Project: A construction or installation site exceeding 6-12 months
• Service: Employees physically present in Saudi Arabia for more than 183 days in any 12-month period

The 183-day rule is the most commonly triggered threshold for consulting, tech, and professional services companies. (See the full PE article for details.)

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GOSI (Social Insurance) — Not a Tax, but a Mandatory Contribution

GOSI contributions are not technically a tax, but they are a mandatory employer cost that operates like one:

Branch	Rate	Who pays	Who's covered
Occupational hazards	2%	Employer only	All workers (Saudi and non-Saudi)
Annuities (retirement)	Up to 22% (phased in)	Employer + Employee (split 50/50)	Saudi nationals only
Unemployment insurance	2%	Employer + Employee (split 50/50)	Saudi nationals only

Contributions are calculated on wages up to SAR 45,000/month. For a team of 10 Saudi employees each earning SAR 20,000/month, your combined GOSI exposure (employer share only) is roughly SAR 400,000/year — a number that needs to be in your Year 1 budget.

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End of Service Benefit (EOSB)

When any employee's employment ends — regardless of whether they resign or are terminated — they are legally entitled to an End of Service Benefit under the Saudi Labor Law. EOSB is calculated based on final salary and years of service.

EOSB is a statutory liability that accrues as long as employees are employed. It is not discretionary.

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Tax Calendar: Key Dates

Obligation	Frequency	Due date
VAT return	Quarterly (or monthly for large entities)	Last day of month after quarter end
CIT return	Annual	120 days after fiscal year end
GOSI contributions	Monthly	Before end of each month
WHT remittance	Monthly	10th of following month

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The Most Common Tax Mistakes Foreign Companies Make

1. Not registering for VAT on time. ZATCA will assess retroactive VAT from when you exceeded the threshold, plus a 5-25% penalty.

2. Assuming no WHT obligation because you have no Saudi entity. Your Saudi client is required to withhold even if you don't have a Saudi company. Check whether your home country's DTA reduces the applicable rate.

3. Not budgeting for GOSI. GOSI contributions are not a rounding error — they add up to 12-24% of Saudi employee wages on top of salaries.

4. Confusing Zakat and CIT. If you have Saudi partners, you need separate calculations for Zakat (on their share) and CIT (on yours). They are assessed differently.

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Know Your Tax Position Before You Commit

Your exact tax position in Saudi Arabia depends on your ownership structure, the nature of your revenues, and your home country's DTA status.

Daleel covers your core tax obligations — which taxes apply, what the rates are, and what your Year 1 compliance calendar looks like — based on your specific sector, entity type, and country of origin.

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Sources: ZATCA official mandate; ZATCA Circular 2303001 (Permanent Establishments, May 2023); ZATCA General Manual of Zakat (2021); GOSI Social Insurance Law (Royal Decree M/273, 2024); Saudi Income Tax Law (Royal Decree M/1).