Tax Number In Saudi Arabia: An Expats Guide

Getting a tax number in Saudi Arabia is a crucial step for anyone planning to work or do business in the kingdom. Don’t Worry! We’ve got you covered!

This identifier not only ensures compliance with local regulations but also simplifies various administrative processes. Let’s break down the steps to obtaining your tax number and why it’s essential.

Let’s dive in!

What Is The Tax System In Saudi Arabia?

One of the main reasons that sets the Saudi tax system apart from that of many other nations is the absence of personal income tax.

This implies that you probably won’t pay taxes on your profits if you work as an employee in Saudi Arabia and have no other sources of income.

Furthermore, there are no stamp duty or wealth taxes, such as inheritance tax.

Saudi Arabia is not a completely tax-free nation, though. Many taxes need to be considered, particularly if you are a foreign national or earn a living in the nation as a non-resident.

Business Taxes: including corporate income tax and self-employed income tax at a standard rate of 20% on business profits; VAT-registered businesses also pay VAT at a standard rate of 15%
Withholding Taxes (WHT): payable by non-residents on income made in Saudi Arabia, at a rate of between 5% and 20%
Real Estate Transaction Tax (RETT): effective from October 2020, this is payable on property transactions at a rate of 5%
White Land Tax (WLT): payable by owners of urban vacant land designated for commercial or residential use at an annual rate of 2.5% of market value
Social Security Contributions: paid by Saudi employees at the rate of up to 10% of their salary, with the employer also contributing up to 12%
Zakat: charitable tax linked to the Islamic faith that contributes towards those in need, charged at 2.5% on the net worth of all Saudi nationals and businesses

In Saudi Arabia, taxes are collected by the Zakat, Tax and Customs Authority (ZATCA), and the fiscal year lasts from January 1 to December 31.

All taxes in Saudi Arabia are federal; there are no state, local, or regional taxes.

What Is A Tax Number?

It is a special number given to every person or business that has registered with the relevant government organisations to be a part of the tax system.

One tool that helps with organising financial activities and figuring out tax liabilities is the tax number, which is used to ascertain the tax identity of persons and companies.

Governmental organisations can monitor financial activities and assess an individual’s or entity’s tax compliance with the use of the tax number.

Put differently, the tax number functions as a tool for determining the tax identity of every organisation involved in the tax system, making it easier to identify data about income, transactions, and tax obligations.

The tax number is assigned or issued by the appropriate tax authorities and differs depending on the country.

A tax number is often necessary in today’s tax systems in order for people and organisations to lawfully conduct a variety of financial and commercial activities.

What Is The Tax Number In Saudi Arabia?

Value Added Tax, or VAT ID for short, is another name for the tax number.

Another name for it may be a TIN, or taxpayer identification number.

This is brought up since inquiries concerning “What is a VAT number?” are frequently asked and these codes are highly prevalent. or “Where can I find the VAT number?”

In order to identify the establishment and guarantee its effective distinction, the tax registration number for an establishment in the Kingdom of Saudi Arabia is composed of 15 numbers, each of which is separated.

The tax registration number is structured as follows:

The First Number: refers to the country’s identification number within the Gulf Cooperation Council.
From the second to the ninth number: they represent the facility’s serial number.
The Tenth Digit: is assigned to the verification number.
From the eleventh number to the thirteenth number: they indicate the numbers of the taxpayer’s subsidiaries.
The last two numbers: indicate the type of tax in question.

It is mentioned that in order to guarantee the efficiency of tax operations and accomplish the intended goals, this system attempts to differentiate each establishment from the others.

Also, prevent repeating the registration number between various establishments.

How Do You Get A Tax Number In Saudi Arabia?

To obtain a tax number in the Kingdom of Saudi Arabia, you can follow the following steps:

Visit The Website Of The General Authority Of Zakat And Tax (GAZT): You can visit the Authority’s website to obtain the necessary information and fill out the form to request a tax number.
Fill Out The Application Form: The tax number request form must be filled out accurately. This form can be found on the authority’s official website.
Submitting The Application: After filling out the form, the application can be submitted electronically through the Authority’s website, or it can be delivered in person to one of the Authority’s offices.
Follow-Up: You can follow the status of your application and check the progress via the website.
Receiving The Tax Number: When the request is approved, you will receive a message or notification containing your tax number.

It is important to adhere to the requirements and procedures specified by the General Authority of Zakat and Income to ensure that the registration process is successful.

How To Cancel The Tax Number?

Cancelling the tax number in the Kingdom of Saudi Arabia is done through the following procedures:

Submitting A Cancellation Request: Submit a request for cancellation of the tax number to the General Authority of Zakat and Tax (GAZT).
Fill Out The Form: Fill out the designated form to cancel the tax number, which contains the necessary information.
Submission Of The Application: Submit a cancellation request to facilitate the process and speed up the review of the request.
Verification And Review: The Authority may review the application and verify the documents submitted to ensure that all conditions are met.
Approval Of cancellation: If the request is approved, you will receive a notification stating that the tax number has been cancelled.
Updating Records: You must update your internal records to reflect the cancellation of the tax number and update any other accounting or tax system.

Make sure to follow the detailed procedures specified by the General Authority of Zakat and Income to ensure full compliance with the requirements.

Benefit from the Doc Suite system to facilitate the application process and communicate with the Authority more effectively.

Who Pays Tax In Saudi Arabia?

Whether you meet the requirements to be considered a resident for tax reasons will determine your tax responsibilities in Saudi Arabia.

If you live in Saudi Arabia for at least 183 days during the tax year or if you have permanent residence and spend at least 30 days there, you are considered a tax resident in Saudi Arabia.

Every citizen is required to pay into social security, and foreigners who operate their own firm must pay business taxes. VAT and excise taxes on products and services are mandatory for all parties.

Zakat is another tax that Saudi citizens and other GCC citizens are required to pay. Zakat is imposed on both people and enterprises.

Expats who reside in the country don’t have to pay Zakat but can choose to do so if they wish.

How Does Tax Work For Expats?

You will be subject to withholding tax if you are a non-resident making money or conducting business in Saudi Arabia, such as a consultant operating there.

The person or business that is paying you has a legal obligation to withhold this sum. Withholding tax might range from 5% to 20%, contingent on the nature of the business or service rendered.

Depending on the tax regulations in their home country, non-residents who generate an income may also be liable to taxes in their home nation.

ZATCA presently has tax agreements in place with 56 other nations to avoid double taxation, which is the practice of paying taxes on your income in two distinct countries.

Self-employed foreign nationals are normally required to pay corporate income tax in the nation at the usual rate of 20% of their earnings.

Lastly, residents of the Kingdom and the other GCC nations are required to donate a modest portion of their net worth to charitable causes. We refer to this as Zakat. Foreigners are exempt from paying zakat.

What Are Types Of Tax In Saudi Arabia?

Income Tax

In Saudi Arabia, earnings from employment are not subject to income tax.

If you have a permanent establishment (PE) in the Kingdom and make money from other sources, you can be required to pay tax at the same rate as corporations.

Income Tax For Self-Employed Workers

In order to operate a business or work for themselves in Saudi Arabia, foreign nationals typically need to get specific permits from the Ministry of Investment.

Since non-residents’ self-employed income is normally subject to corporate income tax rates, operating your own business will usually result in you paying about 20% of your net profits in taxes.

There are three main instances where self-employed workers could find themselves in potential violation of the country’s tax laws:

Being an expat and offering services (e.g., plumbers, electricians, beauticians) without having commercial registration
Running a business as an expat but under the name of a Saudi national
Simultaneously working for an employer and on a self-employed basis without an Iqama (national identification) transfer

It is crucial to remember that there might be serious consequences if you neglect to obtain the required registrations and disclose the full nature of your self-employed activity.

The Saudi government, for instance, has the authority to levy fines up to SAR 50,000, inflict jail sentences of up to six months, or even deport someone.

Corporate Tax

In Saudi Arabia, businesses must pay income tax, however the amount varies based on the owner’s nationality.

Investors who are not Saudi or GCC nationals are typically subject to a 20% corporate income tax on their net-adjusted profits.

However, this increases to between 50% and 85% corporate tax if their revenue is derived from the extraction of oil and hydrocarbons.

Zakat is often due by Saudi investors and individuals from GCC nations who are regarded as Saudi citizens for taxation reasons in Saudi Arabia. 2.5% of the company’s Zakat base, or net worth, is often taxed.

However, calculating this can be rather challenging.

If both Saudi and non-Saudi investors own the company, they will pay both income tax (on the portion of income attributed to non-Saudi sources) and Zakat (on the rest).

Corporate Tax Credits And Rebates

For investors that choose to put money into the Kingdom’s less developed areas, tax benefits are available.

These include the northern territories, Al-Baha, Al-Jouf, Ha’il, Jazan, and Najran. For ten years following the project’s inception, tax incentives are available to all projects.

Qualifying investing companies are also eligible to have their annual tax bills reduced by:

Half the annual training expenditure on Saudi employees
Half the annual salaries paid to Saudi employees
15% of the non-Saudi capital share, depending on certain conditions

If the investment capital exceeds SAR 1 million and more than five Saudi employees hold contracts that are at least a year long in the administrative or technical fields, then additional tax deductions become available.

In addition, the Saudi government established an Integrated Logistics Bonded Zone (ILBZ) near Riyadh’s King Khalid International Airport.

For up to 50 years, businesses that establish themselves in the zone can take advantage of several benefits such as suspended customs duty, exemption from withholding tax, and zero income tax.

Import And Export Taxes

In Saudi Arabia, customs tax is due on imported products. Depending on the goods, charges might vary from as high as 25% to as low as 0.5% to 15%.

For instance, there is a 20% tax on imported electrical goods, cast iron, and marble and ceramics.

If imported equipment and raw materials cannot be found on the local market, they may be exempt from customs duty when imported for specific approved projects.

On the official website, you can compute your expected payment rates and locate all customs charges.

Excise Tax

The Excise Tax Law came into force in June 2017. It is only charged on a small number of products that are considered harmful, including:

Tobacco-related products (100%)
Soft drinks (50%)
Energy drinks (100%)
Sweetened drinks (50%)
Electronic devices and tools used for smoking, vaping, and similar activities (100%)
Liquids consumed in electronic devices and tools used for smoking, vaping, and similar activities (100%)

It is important to note that alcohol and pork are not on this list. That is because it is illegal to sell these products within the Kingdom of Saudi Arabia.

Payroll And Withholding Taxes

All people that work in Saudi Arabia contribute to the social security net on a monthly basis. The amount of tax paid depends on the nationality of the employee, as follows:

Saudi nationals pay a 21.5% rate, which is paid for by both the employer (12%) and the employee (10%)
GCC Nationals (excluding Saudis) pay between 17% and 22%, which is paid for by the employer (12%) and the employee (the remainder)
Non-Saudi expats pay only 2% through their employer’s payroll system (this goes towards costs of occupational hazards rather than social insurance such as unemployment benefits or pensions)

If you are a non-resident and receive any income from a business or resident in Saudi Arabia, including those that have a PE, you will usually have to pay withholding tax (WHT).

This is typically between 5% and 20%. The domestic rates vary between 5% on dividends and interest, and 15% on royalties.

WHT should be paid during the first 10 days of the month that follows the month in which the payment was made.

VAT In Saudi Arabia

Value Added Tax (VAT) was first introduced in Saudi Arabia in January 2018, at a rate of 5%. This increased to 15% in July 2020 and is charged on most goods and services.

However, there are a number of exemptions. For instance, you don’t have to pay VAT on the following financial products:

Islamic finance products that are Shari’ah compliant
The operation of current, checking, and savings bank accounts
Life insurance
Residential real estate leases (excluding hotels and similar short-term rentals)
The issue or transfer of money or security for a month
Credit and other financial instruments
Interest on loans, credit, or debt security

There are also a number of zero-rated (0% rate) products for VAT, such as:

Certain medical equipment and medicines
International transport services of goods or passengers, including related products such as vehicles, vehicle maintenance, and spare parts
Supply of precious metals (such as gold and silver) for investment purposes
Export of goods and services to non-GCC customers or to outside the GCC region
Supply of goods and services within customs duty suspension zones

Non-resident businesses may be able to request a refund on VAT paid in Saudi Arabia.

To receive a reimbursement, they will need to make a claim by the end of June following the year the VAT was incurred.

For example, those who paid VAT in 2023 will need to submit their claims by 30 June 2024.

What Are The Penalties For Tax Avoidance And Evasion?

If you fail to submit the required tax information or give false information to the tax authorities in Saudi Arabia, you can face strict financial penalties, such as:

If you submit false documents to evade the amount of VAT tax due, you can expect to pay a fine of up to three times the amount of VAT
You can get a fine of 5% to 25% of the tax owed if you fail to submit a tax return
Failing to keep tax invoices, books, records, and accounting documents could result in a fine of up to SAR 50,000

The ZATCA website provides a list of tax penalties.

Conclusion

Securing your tax number in Saudi Arabia is an important part of your financial and legal setup. With the right information and preparation, the process can be straightforward and stress-free.

Stay informed, follow the steps, and you’ll be ready to navigate the Saudi tax landscape with confidence.

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