Tax & Residency Guide in Saudi Arabia

### Tax Guide for Saudi Arabia

Saudi Arabia is known for its oil-rich economy and attractive tax regime, making it a popular destination for expatriates seeking employment opportunities. Understanding the tax system and requirements in Saudi Arabia is crucial for residents and businesses to ensure compliance and optimise tax planning strategies. In this guide, we will cover the key aspects of the tax system in Saudi Arabia, including residency triggers, tax system type, treaties, entity options, filing requirements, rates, deductions, when to hire an advisor, and country-specific tax strategies.

#### Residency Triggers

In Saudi Arabia, an individual is considered a tax resident if they spend 183 days or more in the country in a tax year, which follows the Hijri calendar. The Hijri calendar is a lunar calendar that is approximately 11 days shorter than the Gregorian calendar. Therefore, it is important for individuals to keep track of their days spent in the country to determine their tax residency status accurately.

#### Tax System Type

Saudi Arabia operates on a territorial tax system, where only income generated within the country is subject to tax. Income earned outside of Saudi Arabia is not typically taxed, making it an attractive destination for expatriates looking to save on taxes.

#### Tax Treaties

Saudi Arabia has tax treaties with various countries to avoid double taxation and provide relief to residents and businesses. These treaties outline the rules for determining which country has the right to tax specific types of income. It is essential for individuals and businesses to understand the provisions of these treaties to optimise their tax liabilities.

#### Entity Options

For businesses operating in Saudi Arabia, there are several entity options available, including limited liability companies, branches of foreign companies, joint ventures, and partnerships. Each type of entity has its own tax implications and requirements, so it is crucial to choose the right structure based on your business activities and goals.

#### Filing Requirements

Individual taxpayers in Saudi Arabia are required to file an annual tax return if they meet the residency criteria and have taxable income. The tax year in Saudi Arabia follows the Hijri calendar, and the deadline for filing tax returns is typically four months after the end of the tax year.

#### Tax Rates

The tax rates in Saudi Arabia vary depending on the type of income and the residency status of the taxpayer. For individuals, the tax rates range from 0% to 20%, with higher rates applicable to higher income brackets. Corporate tax rates in Saudi Arabia are generally fixed at 20% for most businesses, although certain industries may have different rates or exemptions.

#### Deductions

In Saudi Arabia, individuals are allowed to claim various deductions to reduce their taxable income, including expenses related to education, healthcare, housing, and charitable contributions. Businesses can also claim deductions for certain expenses incurred in the course of their business activities.

#### When to Hire an Advisor

It is advisable to hire a tax advisor in Saudi Arabia if you are unsure about your tax obligations, need assistance with tax planning, or have complex tax issues. A professional tax advisor can help you navigate the tax system, maximise deductions, and ensure compliance with the regulations.

#### Country-Specific Strategies

When it comes to tax planning in Saudi Arabia, there are several strategies that individuals and businesses can employ to minimise their tax liabilities. These include investing in tax-efficient vehicles, taking advantage of deductions and exemptions, structuring business activities to optimise tax benefits, and leveraging tax treaties to avoid double taxation.

In conclusion, understanding the tax system in Saudi Arabia is essential for residents and businesses to manage their tax liabilities effectively. By being aware of residency triggers, tax rates, filing requirements, and country-specific strategies, individuals and businesses can ensure compliance with the regulations and maximise their tax planning opportunities. Consider consulting with a tax advisor to develop a tailored tax strategy that meets your specific needs and goals in Saudi Arabia.