• 1- The provisions of the Income Tax Law apply to resident corporate entities for shares owned directly or indirectly by non-Saudi individuals, and for shares owned directly or indirectly by individuals engaged in the production of oil and hydrocarbon materials, whether they are natural or legal persons, residents or non-residents. Shares owned by non-Saudis for the purpose of trading through transactions in the Saudi financial market do not fall within the shares of non-Saudi partners in resident corporate entities whose shares are listed in the financial market. Indirect ownership refers to ownership up to the second level.

• The tax base for the resident corporate entity is calculated independently from the tax base of its shareholders or partners or its subsidiaries, even if they are consolidated for accounting purposes. The share of profits or losses resulting from its investments, which are reported according to the equity method, is not included in the tax base. Subsidiaries are defined as companies owned by more than 50% of their capital or that have control over the formation of their board of directors. The provisions of the law also apply to non-resident individuals or legal entities, whether Saudi or non-Saudi, who conduct activities in the Kingdom through a permanent establishment therein, or who earn income from sources within the Kingdom.

• 2- A non-resident person who earns income from sources in the Kingdom, without having a permanent establishment therein, is subject to tax as follows:

  • A- If the income is from the specified incomes in Article 68 of the law, it is subject to withholding tax according to the rules set forth in that article.

  • B- If the income represents capital gains resulting from the disposal of fixed and current assets, or if the income represents capital gains resulting from the disposal of shares in a resident company, it is subject to tax according to the general rules of the law.

• 3- The provisions of the Income Tax Law apply to every natural or legal person, Saudi or non-Saudi, engaged in the investment and transportation of natural gas.

The term "taxable activity" refers to all forms of activity of various types, such as commercial, industrial, agricultural, and service activities, banking operations, insurance, and investments of all kinds or fields, transfer operations, and leasing of movable and immovable properties, tangible and intangible, as well as professional, or craft activities, or any other similar activity aimed at achieving profit, such as agencies and brokerage activities, and it does not include merely opening bank accounts of various types (current, term, savings), or trading in shares of a company registered in the financial market in the Kingdom by a natural person residing therein.

• (1) A natural person shall be deemed a resident in the Kingdom during a taxable year if he has a permanent place of abode in the Kingdom and is present in the Kingdom for a period of not less than thirty days, continuous or in aggregate, during the taxable year. A natural person shall also be deemed a resident in the Kingdom if he is present in the Kingdom for a period of not less than one hundred and eighty three days, continuous or in aggregate, in the taxable year even if he has no permanent place of abode in the Kingdom.

• (2) A permanent place of abode shall mean a residence
  owned by a natural person or leased by contract for a
  minimum of one year during the taxable year, or a residence provided for the natural person by any party during
  the taxable year for a period of not less than one year. 

• (3) Nationality shall not determine the place of abode of a
  person. A natural or corporate person, notwithstanding its
  nationality, is not considered a resident in the Kingdom
  unless the residency conditions of the Law and of these
  Regulations apply.

• (1) An agent referred to in Article ( 4 ) of the Law is a dependent agent who has any of the following powers:

  • (a) Negotiation on behalf of a non-resident;

  • (b) Conclusion of contracts on behalf of a non-resident;

  • (c) Possession of commodities, owned by a non-resident, available in the Kingdom to meet the clients’ orders on behalf of the non-resident on a regular basis.

• (2) The place from which a non-resident carries out insurance and/or reinsurance activity through an agent shall be deemed a permanent establishment of the non-resident even if the agent is not authorized to negotiate and conclude contracts on behalf of the non-resident.

• The following types of income are considered to have arisen from activities conducted in the Kingdom, and thus are derived from a source within the Kingdom:

• 1 - Loan returns for non-residents in any of the following cases:

  • A- If the debt is secured by movable or immovable property located in the Kingdom.

  • B- If the borrower is a resident of the Kingdom.

  • C- If the loan is related to an activity conducted in the Kingdom through a permanent establishment.

  • Loan returns refer to any amounts realized in exchange for the use of money, including income generated from lending operations of any kind, whether secured or unsecured, and whether or not the right to participate in the debtor's profits was granted, and it includes income generated from government and non-government bonds.

  • Returns from loans resulting from interbank deposits are excluded if the deposits remain with the resident borrowing bank for a maximum of ninety days, provided that an annual statement certified by the Saudi Central Bank is submitted, detailing the names and addresses of the lending banks, the duration of the loan, and the amount of loan returns paid.

• 2- Insurance premiums and reinsurance premiums, in any of the following cases:

  • A - If the insured asset is located in the Kingdom.

  • B- If the insurer is a resident of the Kingdom.

  • C- If the insurance is on activities or risks associated with an activity conducted in the Kingdom.

• 3- Income generated from technical and consulting services in any of the following cases:

  • A - If the service is provided to a person residing in the Kingdom.

  • B- If the service is related to an activity conducted in the Kingdom.

• 4- Income generated by a resident capital company in the Kingdom from its operations and the operations of its branches inside or outside the Kingdom, taking into account the following:

  • A- Regarding income generated from its investments in another capital company residing in the Kingdom, in order to avoid double taxation, this income is excluded from tax liability provided that the following conditions are met:

    • 1- This income has previously been subject to tax in the Kingdom.

    • 2- The ownership percentage in the invested company is not less than 10%.

    • 3- The period of ownership of the shares is not less than one year.

  • B- As for income generated from its investments and operations outside the Kingdom, it is subject to tax in the Kingdom unless the applicable double taxation avoidance agreement between the Kingdom and the investing country states otherwise.

• 5- Income generated from movable and immovable property that is related to activities in the Kingdom or associated with them conducted through a resident person.

• 6- Income generated from the sale of goods and merchandise that were manufactured or produced within the Kingdom.

• 7- Contracts for the supply of goods to the Kingdom, including contracts for their shipping and insurance, are not considered to have arisen from activities conducted in the Kingdom unless the contracts include accompanying works such as internal transportation, installation, maintenance, training, and similar activities conducted within the Kingdom. In this case, only the accompanying works are considered to have arisen from activities in the Kingdom.

• The following services shall be considered performed in the Kingdom in any of the following cases:

  • (1) If work required for a service is carried out, in full or in part, within the Kingdom even if the service is remotely performed. The physical presence of a service provider is not required.

  • (2) If the work is performed on board of an airplane or a ship operating for a person carrying out the activity in the Kingdom.

1- Capital gains realized from the disposal of securities traded in the financial market in the Kingdom are exempt from tax, whether through sale, trading, or otherwise, according to the following conditions:

• A- If the disposal process is conducted in accordance with the Law of the Financial Market in the Kingdom.

• B- The investments that were disposed of must not have been in existence prior to the effective date of the tax law specified in Article Seventy-Four of this Regulation.

2- Capital gains realized from the disposal of securities traded in a financial market outside the Kingdom are also exempt from tax, whether through sale, trading, or otherwise, according to the following conditions:

• A- If these securities are traded in the financial market in the Kingdom.

• B- The investments that were disposed of must not have been in existence prior to the effective date of the tax law specified in Article Seventy-Four of this Regulation.

3- Cash distributions as well as in-kind distributions (such as stock or free share distributions, for example) due from investments of a capital company residing in resident or non-resident companies are exempt, provided that the following conditions are met:

• A- The investments of the capital company residing in the capital of the invested company must be 10% or more during the years for which the distribution is made.

• B- The ownership of these investments, which is set at a minimum of 10%, must be maintained for one year or more during the year for which the distribution is made.