OTHER SAUDI REGULATIONS
Accountants, auditors, lawyers and legal consultants, engineers and engineering
consultants, translators and translation bureaus must be licensed by the Ministry of
Commerce. For further details, contact the Department of Internal Trade, Ministry of
All enterprises must pay income tax or Zakat to the Directorate General of Zakat and Income Tax. There is no personal income tax in Saudi Arabia for either national or expatriate employees.
Zakat is a form of religious tithe paid annually by Saudi and GCC companies and individuals engaged in trade in the Kingdom. The Zakat on trade activities is 2.5 percent on taxable capital.
Income Taxes for Foreign Enterprises
The taxable income of business enterprises following the tax holiday includes the profits of a foreign company and the share of non-Saudi sleeping partners in the net profits of partnership companies. The following tax rates apply:
Net Profit Level Tax Rate
The First SR 100,000
Companies formed under the provisions of the Foreign Capital Investment Act with participation of Saudi capital of not less than 25 percent are exempt for up to 10 years from payment of income tax. In 1993, this exemption was extended to cover profits arising from new capital investments in existing industrial joint venture projects.
Tax rates for self-employed expatriates
The maximum income exempted from tax is SR 6,000 annually. The successive rates on taxable profits are:
Taxes are collected annually, according to the Hijra year, unless the payer informs the Zakat and Income Tax Department in advance that he wants to pay according to their fiscal year.
All companies in Saudi Arabia formed in accordance with the Regulations for Companies are required to comply with Saudi Arabian generally accepted accounting principles. Such companies are required to have their financial statements audited by an auditor licensed in Saudi Arabia and to file annually with the Ministry of Commerce. The major accounting and auditing regulations are contained in the:
The following accounting records must be maintained in Arabic and kept in the Kingdom:
Accounting records maintained on computers are subject to the following additional requirements:
The Ministry of Commerce controls the accounting profession in Saudi Arabia. To guide the profession the Ministry has issued the Saudi Arabian Auditing Standards and the Saudi Arabian Standards of General Presentation and Disclosure. The Saudi Arabian Monetary Agency has issued additional accounting standards for banks. Although the standards for presentation and disclosure generally follow international accounting standards, the following accounting aspects are unique to Saudi Arabia:
On January 2, 1996, the Council of Ministers approved the Code of the Settlement Preventing Bankruptcy. The Code, which went into effect on June 1, 1996, provides a framework in which a merchant debtor may reach a settlement with his creditors to avoid bankruptcy. The Code is not designed to prevent personal (nonbusiness-related) bankruptcy.
The Code allows debtors to seek conciliation with their creditors through committees to be set up at various local Chambers of Commerce and Industry in the Kingdom. If a settlement cannot be reached, or if the debtor so wishes, he may apply to the Board of Grievances and request it to call his creditors to offer them a settlement to avoid bankruptcy. However, such settlements must be approved by a majority of the creditors. When settlement proceedings begin, claims against the debtor are to be dropped. Prior to the enactment of the Code, bankruptcy proceedings were governed by the 1931 Commercial Court Regulations which do not provide for the reorganization of debts to avoid bankruptcy.
In the case of industries using mineral resources (including quarry materials) and proposing to extract their own raw materials, concessions (excluding those for petroleum, natural gas, pearls, coral, and similar materials) must be obtained according to the 1973 Mining Code supervised and implemented by the Ministry of Petroleum and Mineral Resources.
Under this regulation, it is possible to obtain one or more of the following permissions and authorizations:
An exploration permit is granted for an initial period of not more than two years and can be extended or renewed at the discretion of the Ministry. An excavation license is issued for a maximum area of 10,000 square kilometers and for a period not exceeding five years renewable for a period not exceeding four years. The holder of an excavation license has the sole right to obtain a license for the exploitation of mineral resources found during the validity of the exploration license. The holder has surface and subsoil rights, and therefore is subject to a surface rental, at a rate per square kilometer that is fixed in the lease document. The rent shall be not less than SR 1,000 and not more than SR 10,000 per square kilometer per year or fraction of a year. The area allowed by a mining lease should not exceed 50 square kilometers.
Rights in small mines (area not exceeding 100 hectares) are granted under license by the Minister. They are issued only to Saudi nationals, for a period not exceeding 20 years, and can be renewed or extended for an additional 20 years.
Non-metallic minerals, rocks and other stones used only as raw materials in processing plants are considered essential for industrial plants. A permit for exploiting such materials is required, but the Ministry may vary the surface rentals to make an allowance for the extraction of low-value minerals.
An independent concession, separate and not connected with a mining concession, can be awarded to build and operate refineries and mineral treatment plants as included in this system, in addition to pipelines, railroads and other utilities necessary to transport those minerals, their products, and the materials used in their treatment.
The Minister of Petroleum and Mineral Resources can also give permission to collect and obtain stones and minerals for a limited period, not exceeding 2 years; the permission can be renewed for a period or periods not exceeding 10 years.
The Code provides, among other things, for the use of modern techniques in production as recognized by the mining industry, and for precautions against undue waste of natural resources. All equipment imported for the implementation of a license issued under the Mining Code is exempt from import and export duties. An income "tax holiday" of five years is granted by the Code to document holders, starting from the date of the sale of products or from the beginning of the fourth year after the issue of the lease, whichever occurs first. Unless the Ministry decides to negotiate with a document holder on the basis of profit-sharing, the document holder will pay income tax after the end of the "holiday" in accordance with the income tax laws in force.
Banking in the Kingdom is regulated by the Saudi Arabian Monetary Agency (SAMA) under
the 1966 Banking Control Code. Licenses for starting a banking business are issued by the
Minister of Finance and National Economy. To ensure the liquidity and solvency of banks,
ratios of deposit liabilities to paid-up capital and reserves, and the allocation of
profits to build up reserves are regulated. Similarly, limits are placed on individual
lending accounts. SAMA also maintains a statutory deposit from each bank, in compliance
with the Code. Under the regulation, restrictions are placed on loans granted to business
firms or companies in which the director of a bank has a direct interest. Any
constitutional change in the bank can be brought about only after obtaining the approval
African Development Bank (AfDB)
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