2. Scope of taxable income
The income arising from business activities is subject to income tax in the KSA. Business activities are defined as any agricultural, industrial, commercial, craft or service activities carried on with the aim to realize profits. This includes the income from activities in the natural gas and oil sectors.
An income is considered to be from the KSA sources if it is:
- from activities carried on in the KSA;
- from immovable property situated in the KSA, including the profits from the disposal of such property or from the shares of a company which has of immovable property situated in the KSA;
- from the disposal of the shares of a resident company;
- related to the leasing of movable property used in the KSA;
- related to the sale of intellectual or industrial rights in the KSA;
- dividends, management fees or directors’ fees paid by a resident company;
- a remuneration paid by a resident company for services rendered by its foreign headquarters or an associated enterprise;
- a remuneration paid by a resident for services rendered (wholly or partly) in the KSA;
- related to the exploitation of a natural resource situated in the KSA;
- derived from a PE in Saudi Arabia owned by a non-resident, including the income from the sale by the non-resident of similar goods, the provision of similar services or the carrying on of similar activities in the KSA as those supplied, provided or carried on through the PE.
- interest and other income from loans paid to non-residents, if the loan is guaranteed by movable or immovable properties situated in the KSA, the lender is a Saudi resident, or the loan is attached to an activity carried on in the KSA.
- income from consultancy services, if the services are rendered to a resident person or are related to an activity carried on in the KSA;
- income from the sale of goods and products produced in Saudi Arabia;
- income from contracts relating to the import into the KSA of equipment, machinery or goods, etc. with certain exceptions
- income from services if the work (or part thereof) is carried out in the KSA or on board a ship or aircraft operated by a person carrying on activities in the KSA; and
- income of resident companies from operations carried on outside the KSA, and income of foreign branches.
The tax base for a resident corporation is the non-Saudi’s share of net profits and for a non-resident carrying out activities in the KSA through a PE is the net profits from the activities of the PE. The tax base of a capital company is determined independently from its shareholders, partners or its subsidiaries, irrespective of whether the accounts of the capital company are consolidated or not.