With the suite of recent economic and social changes in the country, expanding your business into Saudi Arabia might be the next step.
However, there are a number of important considerations to make to ensure that you can make the most of a dynamic economy.
Income tax in Saudi Arabia
While Vision 2030 is shaping up to make the country more attractive to investors and businesses, there are important tax considerations to keep in mind.
Income tax remains a pressing issue for companies determining how best to handle their employee expenses.
Saudi Arabia imposes income tax on foreign individuals and entities based on the revenue that they earn within the country.
As your business expands within the country, you may find yourself in possession of shares in a Saudi Arabian Limited Liability Company (LLC).
If this is the case, you will be subject to a 20 per cent corporate income tax on the profit generated from this business.
If you establish a permanent presence in the country, you will incur more general tax obligations, while any remote work conducted in the country will be subject to withholding tax or income tax, depending on the nature of the work.
The most likely determining factor in this instance would be further you have a permanent establishment in the country.
Tax exemptions
One of the main appeals of conducting business in Saudi Arabia is likely the degree to which some incomes may be exempt from tax.
If you make any Capital Gains from securities, provided they are compliant with the law of the country, then they will be exempt from tax.
This will also apply to securities listed on foreign exchanges as long as they are traded in Saudi Arabia.
The sale of property or assets that are not linked to the operations in Saudi Arabia could be exempt from tax there.
The exemption largely depends on the asset not being part of your Saudi Arabian business’s active trading inventory.
Lastly, the dividends from strategic shareholdings that you receive from your Saudi Arabian subsidiary or a joint venture with someone in the country could be exempt.
To ensure this is the case, it is worth noting that your company will need at least 10 per cent ownership, and the stake will need to have been held for more than 12 months.
Expanding into a new market is always an exciting time, but one that carries with it many risks.
Speaking to a professional financial advisor before expanding can ensure that your business continues to grow and is not hampered by surprises.
If you are considering expanding your business to Saudi Arabia, get in touch with our team for expert advice on tax planning.