Corporate tax and foreign ownership in Saudi Arabia

In Saudi Arabia, corporate income tax (CIT) applies to profits attributable to non-Saudi ownership in resident companies, as well as to certain foreign entities operating in the Kingdom. It is one of several obligations managed by the Zakat, Tax and Customs Authority (ZATCA), alongside Zakat, VAT, and withholding tax. While Saudi and GCC nationals are generally subject to Zakat, non-GCC shareholders are taxed at a fixed corporate rate. This article outlines who is required to register for CIT, how the process works, and key compliance points businesses should be aware of for 2025.

Who needs to register for corporate tax

Corporate income tax in Saudi Arabia applies to resident companies with foreign (non-Saudi and non-GCC) shareholders. Only the foreign-owned portion is taxed, while the Saudi-owned share is assessed for Zakat. Non-Saudi individuals conducting business in the Kingdom must also register, as do non-residents with a permanent establishment, such as a branch or office. Entities earning income from Saudi sources without a physical presence may be subject to withholding tax but are not required to register for CIT. Separate rules apply to those engaged in oil, hydrocarbon, or natural gas activities, with higher tax rates and distinct bases of assessment. These groups are all required to register with ZATCA.

The standard corporate income tax rate in Saudi Arabia is 20% of net adjusted profits, applied to entities with non-Saudi ownership. Companies engaged in oil or hydrocarbon production are subject to higher rates, ranging from 50% to 85%, depending on scale and activity. Income from natural gas investments is assessed separately from other business income and taxed under distinct provisions. While corporate tax targets foreign ownership, Saudi and GCC-owned businesses are subject to Zakat at a rate of 2.5% on their Zakat base. In parallel, withholding tax may apply to payments made to non-resident entities, with rates varying based on the nature of the service.

Step-by-step: How to register for CIT with ZATCA

To register for corporate income tax in Saudi Arabia, companies must follow a clear set of steps. The process begins with registering the business with the Ministry of Commerce to obtain a commercial registration certificate. Once registered, the next step is to create an account on the ZATCA portal using the company’s commercial registration number and contact details. From there, the applicant must upload the required documentation, which typically includes the commercial registration, identification documents, Articles of Association, shareholder details, and financial information. After submission, ZATCA will review the application and issue a confirmation of successful registration. Businesses must complete the registration process within 30 days of becoming liable to avoid late penalties. The system is designed to ensure that all entities falling under the scope of CIT are formally recorded and able to comply with filing and payment obligations.

Filing deadlines, payments, and penalties

Corporate tax in Saudi Arabia follows a self-assessment model. Companies are required to file their tax returns with ZATCA within 120 days of the end of their financial year. If the previous year’s liability exceeds SAR 500,000, three equal advance payments must be made during the sixth, ninth and twelfth months of the tax year. Delayed payments are subject to a penalty of 1% for every 30 days overdue. In addition to late fees, companies may face audit scrutiny and blacklisting for non-compliance. ZATCA has extended its penalty waiver initiative for voluntary disclosures until 30 June 2025, offering relief for eligible filings submitted during this period.

Compliance obligations after registration

Once registered, companies must file annual tax returns supported by audited financial statements. E-invoicing through the Fatoora system is mandatory for all taxable transactions. Employers must ensure payroll records reconcile with data held by GOSI. Any payments made to non-resident parties must be reported and subject to withholding tax where applicable. Financial institutions and relevant entities must also comply with international frameworks such as FATCA and the Common Reporting Standard (CRS), reporting qualifying account information to ZATCA. These requirements form part of the Kingdom’s ongoing efforts to standardise tax and financial reporting.

How can Sovereign PPG help?

Sovereign PPG supports businesses with the registration, filing, and compliance requirements needed to operate in Saudi Arabia. This includes corporate tax registration, ongoing obligations, and coordination with relevant authorities such as ZATCA and the Ministry of Commerce. The team works across multiple sectors and can assist with both new and existing business structures.
If you need support with corporate tax registration or compliance in Saudi Arabia, we can help. Call us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, ksa@sovereigngroup.com, or complete the contact form below