CIT, Zakat and VAT:
first we determine the payer

01

The tax map starts with ownership and activity

A residential capital company with mixed ownership can simultaneously have income-tax and zakat portions. Non-resident evaluates permanent establishment and Saudi-source payments. Separate rates apply for oil/hydrocarbon activities, and incentives RHQ and economic zones require independent eligibility verification.

Resident company

Ownership split, activity and applicable tax/zakat base

Non-resident

PE or Saudi-source payment and WHT

Related parties

Arm's length and disclosure

Indirect taxes

VAT, customs, RETT and excise for transactions

Special regime

RHQ / SEZ only if conditions are met

02

20% CIT and Zakat cannot be added mechanically

A general income tax rate of 20% applies, in particular, to the tax base of a resident capital company in terms of non-Saudi/non-GCC ownership and to a non-resident conducting business through a permanent establishment. Saudi/GCC ownership usually refers to the zakat regime. Zakat is calculated on a special basis, and not simply as 2.5% of accounting profit.

CIT rate

20% of the total tax base if applicable

Zakat

Calculation using zakat base and implementing rules

Mixed company

Allocation between income-tax and zakat portions

Losses

Use and carry-forward according to statutory conditions

Oil / hydrocarbons

Separate increased rates and special treatment

03

VAT 15%: place of delivery and documents are more important than the invoice text

The standard VAT rate is 15%. For each revenue stream, supply, supplier/customer status, place of supply, tax point, zero-rate or exemption, reverse charge and input-tax recovery are determined. Export or cross-border agreement does not automatically mean a 0% rate.

Standard rate

15%

Mandatory registration

By statutory taxable-supplies threshold

Non-resident

Special registration and representative rules

Imports

Customs VAT / reverse-charge analysis

Evidence

Tax invoice, contract, delivery and payment trail

04

Withholding tax: we qualify every payment to a non-resident

WHT applies to Saudi-source payments in favor of a non-resident without permanent establishment. Internal rates depend on the type of payment and can range from 5% to 20%; Treaty relief requires an applicable agreement, residence evidence, beneficial-owner and procedural analysis.

Dividends / interest / rent

Category and internal rate are checked separately

Royalties

Separate IP qualification and 15% domestic rate

Management fees

20% domestic rate

Technical / consulting

Contents of services and related-party status

Return/payment

Monthly compliance after payment

05

Transfer pricing covers the entire controlled-transaction map

Arm's length principle applies to transactions of related persons and persons under common control. Products, services, financing, guarantees, IP, cost allocations and restructuring are reflected in the disclosure and documentation at the applicable thresholds. Since 2024, the scope of laws has been expanded and requires careful verification also for zakat payers.

Transaction map

All intercompany flows and balances

FAR

Functions, assets and risks on each side

Method

Arm's length method and comparables

Documents

Disclosure, local/master file and CbC if applicable

Consistency

Contracts, invoices, accounts and people tell one story

06

RHQ: 0% for qualifying activities only

Qualifying Regional Headquarters can enjoy 0% income tax on qualifying income and 0% withholding tax on qualified payments during the 30-year incentive period. A valid MISA RHQ license, mandatory activities, employees, premises, economic substance and compliance are important for the regime. Operating income cannot be automatically renamed to RHQ income.

Income tax

0% for qualifying RHQ activities

WHT

0% within special RHQ rules

Period

30 years from the applicable starting date

Substance

Premises, employees, functions and management

Non-qualifying

Regular tax regime and separate accounting

07

RETT 5% and related real estate transactions

Real Estate Transaction Tax Law has been in effect since April 10, 2025. In general, RETT is charged at a rate of 5% of the value of the real estate transaction. Before transfer, the object, transaction definition, date, related-party value, exemption, registration and obligated person are checked; rental, development and construction services have a separate VAT analysis.

08

FATOORA is not a PDF, but a structured system

Phase One requires the generation and storage of compliant electronic invoices. Phase Two, introduced in waves starting January 1, 2023, adds solution integration with ZATCA. B2B tax invoices go through the clearance model, and simplified B2C invoices go through the reporting model. A scan or plain text PDF does not become an e-invoice.

1. 01
   Tax determination

   Correct rate, exemption, customer and supply.

2. 02
   Structured invoice

   Required fields are Arabic/English data and UUID.

3. 03
   Security

   Compliant solution, cryptographic stamp and tamper controls.

4. 04
   Integration

   Clearance/reporting, archive and reconciliation with accounts.

09

The calendar is built before the first invoice

CIT / zakat return

No later than 120 days after the end of the year

VAT

Monthly or quarterly according to applicable status

WHT

Form and payment after the month of the relevant payment

TP disclosure

Consistent with annual return and documentation

FATOORA

Constant transaction-level compliance

Records

Arabic-ready evidence and established shelf life

10

Tax control file before ZATCA verification

1. 01

   Ownership memo: CIT, zakat and mixed-company allocation.

2. 02

   Revenue matrix: VAT, source, invoice and supporting evidence.

3. 03

   WHT register for each foreign payment and treaty file.

4. 04

   Transfer-pricing map, agreements and reconciliations.

5. 05

   RHQ or zone eligibility, substance and separate accounts.

6. 06

   FATOORA, returns, GL and bank data without discrepancies.