The words and phrases mentioned hereinafter in this Law shall have the meanings specified below unless the context requires a different meaning:
Minister: Minister of Finance.

The Authority: The Zakat and Income Authority.

Tax: The income tax imposed under this Law.

Person: Any natural or legal person.

Taxpayer: The person subject to tax under this Law.

Activity: Any commercial, professional, or craft activity, or any similar activity aimed at achieving profit, including the use of movable and immovable property.

Royalty: Payments received in exchange for the use of intellectual property rights, or the right to use them, which include, but are not limited to, copyrights, patents, designs, trade secrets, trademarks and trade names, know-how, trade secrets, business reputation, and payments received for information related to industrial, commercial, or scientific expertise, or for granting the right to exploit natural and mineral resources.

The Kingdom: The lands and territorial waters of the Kingdom of Saudi Arabia and its airspace, including its rights in the divided area between it and the State of Kuwait, which includes the maritime and semi-maritime areas over which the Kingdom exercises sovereignty and rights of sovereignty, or jurisdiction under international law.

Capital Company: Joint-stock company, limited liability company, or partnership limited by shares, and investment funds are considered capital companies for the purposes of this Law.

Partnership Company: General partnership, joint venture, or simple partnership.

Resident: A natural person, or company, who meets the residency conditions specified in Article Three of this Law, or any government agency, ministry, public authority, or any legal entity, or any institution established in the Kingdom.

Non-resident: Any person who does not meet the definition of a resident.

Saudi Citizen: A person holding Saudi nationality, and those treated as such.

Commercial Books: The set of commercial books maintained by the taxpayer, which must record all commercial transactions, as described in the Royal Decree No. (M/61) dated 17/12/1409H, and its implementing regulation issued by Ministerial Decision No. (699) dated 29/7/1410H, amended by Ministerial Decision No. (1110) dated 24/12/1410H, and any subsequent amendments.

Regulation: The implementing regulation of this Law.

Natural Gas Investment: The activity of exploring for non-associated natural gas and its production, including gas condensates, as well as the activities of gathering, purifying, processing, parceling, and transporting associated and non-associated natural gas and its liquids, gas condensates, and other accompanying elements.

Natural Gas Transportation: The process of transporting associated and non-associated natural gas from purification plants to processing plants and to parceling plants, or transporting it from any of these plants to consumer facilities, as well as transporting gas condensates and liquids, excluding local distribution networks and pipelines established by non-gas producers after official sales points.

Any word or phrase not defined specifically in this chapter shall apply the definition provided in other applicable laws in the Kingdom, provided it does not conflict with the provisions of this Law.

A - The resident capital company regarding the shares owned directly or indirectly by non-Saudi individuals, as well as the shares owned directly or indirectly by individuals engaged in the production of oil and hydrocarbon materials. This excludes the shares owned directly or indirectly by individuals engaged in the production of oil and hydrocarbon materials in the resident capital companies listed on the Saudi financial market, and the shares owned directly or indirectly by these companies in capital companies.

B - The non-Saudi natural person residing in the Kingdom who engages in activities within the Kingdom.

C - The non-resident person who engages in activities within the Kingdom through a permanent establishment.

D - The non-resident person who has other income subject to tax from sources within the Kingdom.

E - The person who works in the field of natural gas investment.

F - The person who works in the production of oil and hydrocarbon materials.

• A. A natural person shall be considered a resident in the Kingdom for a taxable year if he meets any of the two following conditions:

  • 1. He has a permanent place of residence in the Kingdom and resides in the Kingdom for a total period of not less than 30 days in the taxable year.

  • 2. He resides in the Kingdom for a period of not less than 183 days in the taxable year.

• For the purposes of this paragraph, residence in the Kingdom for part of a day shall be considered residence for a whole day, except in case of a person in transit between two points outside the Kingdom.

• B. A company shall be considered a resident in the Kingdom during the taxable year if it meets any of the following conditions:

  • 1. It is formed in accordance with the Companies Law.

  • 2. Its central management is located in the Kingdom.

• A. A permanent establishment of a nonresident in the Kingdom, unless otherwise stated in this Article, shall consist of a permanent place in which the nonresident practices his business activity, in full or in part, including any business carried out through an agent.

• B. The following shall be considered permanent establishments:

  • 1. Construction sites, assembly facilities, and the exercise of supervisory activities connected therewith.

  • 2. Installations, sites used for surveying natural resources, drilling equipment, ships used for surveying natural resources, and the exercise of supervisory activities connected therewith.

  • 3. A fixed base from which a nonresident natural person carries out business.

  • 4. The branch of a nonresident company licensed to carry out business in the Kingdom.

• C. A place shall not be considered the permanent establishment of a nonresident in the Kingdom if used in the Kingdom only for the following purposes:

  • 1. Storing, displaying, or delivering goods or products belonging to the nonresident.

  • 2. Keeping a stock of goods or products belonging to the nonresident for the purpose of treatment by another person.

  • 3. Purchasing goods or products for the sole purpose of collecting information for the nonresident.

  • 4. Carrying out other activities of a preparatory or auxiliary nature to the benefit of the nonresident.

  • 5. Drafting contracts for signature in connection with loans, delivery of goods or technical services.

  • 6. Performing any group of the activities stated in subparagraphs (1) to (5) of this paragraph.

• D. A nonresident partner in a resident partnership shall be considered an owner of a permanent establishment in the Kingdom, as a shareholder in the partnership.

A- The tax base for a resident corporate entity is the shares of non-Saudi partners from its taxable income from any activities sourced in the Kingdom, minus the allowable expenses as per this Law.

B- The tax base for a non-Saudi resident individual is their taxable income from any activities sourced in the Kingdom, minus the allowable expenses as per this Law.

C- The tax base for a non-resident who conducts activities in the Kingdom through a permanent establishment is their taxable income resulting from the activities of that establishment or related to it, minus the allowable expenses as per this Law.

D- The tax base for an individual is calculated independently from others.

E- The tax base for a corporate entity is calculated independently from its shareholders or partners.

F- The tax base for a person engaged in the production of oil and hydrocarbons is their taxable income, minus the allowable expenses as per this Law, and does not include the tax base related to the investment in natural gas for this person.

G- The tax base for a person engaged in the investment of natural gas is their taxable income in the field of natural gas investment, minus the allowable expenses as per this Law, and this tax base is considered independent from the tax base related to other activities of the person.

A- The tax rate on the tax base is twenty percent (20%) for each of the following:

• 1 - Resident corporate entities.

• 2 - Resident non-Saudi natural persons who engage in the activity.

• 3 - Non-resident persons as a result of activities conducted in the Kingdom through a permanent establishment.

B- The tax rate on the tax base for the taxpayer engaged in natural gas investment is twenty percent (20%).

C- The tax rate on the tax base for the taxpayer engaged in the production of oil and hydrocarbon materials is eighty-five percent (85%).

D- The withholding tax rates are the rates specified in Article Sixty-Eight of this Law.

E- The tax due on a person working in the Kingdom in both the production of oil and hydrocarbon materials and in natural gas investment shall be the sum of the tax due on the two tax bases of that person as per paragraphs (B) and (C) of this Article.