How Foreign Companies Can Stay on Top of Accounting & Tax Compliance in Saudi Arabia

Saudi Arabia attracted $33 billion in foreign direct investment (FDI) in 2025, representing a 51.14% increase compared with 2024, making it one of the world's most attractive FDI destinations.

The Kingdom's position as a growing financial and investment hub is supported by a flexible yet structured tax framework. However, without a thorough understanding of their tax obligations, companies may face significantly higher effective tax costs and penalties for missed compliance deadlines.

For multinational corporations operating across jurisdictions, staying on top of local tax policies and accounting requirements is therefore essential to maintaining a compliant and sustainable presence in the Saudi market.

Corporate Income Tax for Companies in Saudi Arabia

The corporate income tax generally applies to firms wholly or partially owned by non-Saudis, foreign individuals conducting business activities in Saudi, companies generating income from oil or gas activities, and foreign companies operating through a Saudi branch or earning income from clients in the Kingdom.

Saudi follows a dual tax system, meaning the taxes a company pays depend largely on its ownership structure.

Saudi and GCC-owned businesses: Generally subject to Zakat at 2.5%, an Islamic wealth-based levy.

Non-Saudi investors: Generally subject to 20% corporate income tax on profits.

Where a business has both Saudi and foreign owners, the Saudi-owned portion is subject to Zakat, while the foreign-owned portion is subject to corporate income tax.

Cross-Border Payments and Withholding Tax in Saudi Arabia

Foreign companies should also consider Withholding Tax (WHT) when making cross-border payments. When WHT applies: Generally applies when a Saudi-based business makes certain payments to a foreign entity that does not have a taxable presence in the Kingdom.

• 5% WHT: Typically applies to dividends, rent, interest, and insurance payments.
• 15% WHT: Typically applies to royalties and consulting services.
• 20% WHT: Typically applies to management fees.

Transfer Pricing Requirements for Related-Party Transactions in Saudi Arabia

Companies conducting transactions with related parties, such as subsidiaries or other entities within the same corporate group, must also consider Saudi Arabia's transfer pricing requirements.

These rules are designed to ensure that related-party transactions are priced appropriately and do not artificially reduce taxable income.

• CTDF and Auditor’s Affidavit: Depending on the size and nature of their transactions, companies may be required to submit a Controlled Transaction Disclosure Form (CTDF) and an Auditor’s Affidavit.
• Local and Master Files: Larger businesses may also be required to prepare Local and Master Files.
• Country-by-Country Report: Multinational groups that meet the relevant revenue threshold may be required to submit a Country-by-Country Report.

For larger transactions, businesses may be able to seek advance agreements with the relevant authorities. Companies should also be prepared to submit supporting transfer pricing documentation when requested, typically within 30 days.

ZATCA Registration and Tax Filing Deadlines in Saudi Arabia

Companies are generally required to register with the Zakat, Tax and Customs Authority (ZATCA) within 30 days of starting their business activities, while corporate tax returns and any associated payments must generally be submitted within 120 days of the end of the financial year.

Missing these deadlines can result in penalties, making early planning and accurate financial record-keeping essential.

Value Added Tax (VAT) in Saudi Arabia: What Foreign Companies Need to Know

The standard VAT rate in Saudi Arabia is 15%, although certain goods and services may qualify for zero-rated or exempt treatment depending on their nature and use.

Mandatory VAT registration: Businesses must register for VAT if their taxable supplies exceed SAR 375,000 over the previous 12 months or are expected to exceed this threshold in the coming 12 months.

Businesses are generally required to apply for VAT registration within 30 days of exceeding the mandatory threshold. Late registration may result in financial penalties.

Voluntary VAT registration: Companies with taxable supplies or expenses exceeding SAR 187,500 may be eligible for voluntary registration.

Early VAT compliance: Voluntary registration can help businesses establish VAT compliance early and recover eligible input VAT before reaching the mandatory registration threshold.

Non-resident businesses making taxable supplies in Saudi Arabia may also have VAT registration obligations, generally requiring them to register within 30 days of making their first taxable supply. In the event of any changes to your VAT registration details, you must notify the relevant authority within 20 days of the change.

How AstroLabs Helps Companies Adhere to Tax & Accounting Compliance Requirements in Saudi

Whether a company is newly setting up in Saudi Arabia or expanding an existing operation, managing accounting and tax obligations should be treated as a core part of long-term market operations rather than a back-office consideration.

As operations grow, companies must stay on top of financial reporting, tax filings, accounting records, and evolving regulatory obligations.

AstroLabs supports companies throughout this process by helping them manage their ongoing corporate accounting and tax requirements in Saudi Arabia.

This includes maintaining accurate financial records, supporting tax and Zakat compliance, preparing and managing required filings, and helping businesses navigate the local regulatory landscape.

Frequently Asked Questions

Are advance corporate tax payments required?Advance tax payments may apply where a company's tax liability for the previous year exceeded SAR 500,000. 

When are corporate tax returns due?Corporate tax returns and any related payments must generally be submitted within 120 days of the end of the financial year.

What is Withholding Tax (WHT)?WHT applies to certain payments made by Saudi businesses to non-resident entities. The applicable rate depends on the type of payment:

• 5%: Dividends, interest, and rent
• 15%: Royalties and consulting services
• 20%: Management fees

The Saudi-based payer is generally responsible for withholding the applicable amount and remitting it to ZATCA.

Who is required to register for VAT?

VAT registration is generally:

• Mandatory for businesses with annual taxable supplies of SAR 375,000 or more.
• Voluntary for businesses with taxable supplies or expenses of at least SAR 187,500.
• Required for non-resident businesses making taxable supplies in Saudi Arabia, generally within 30 days of their first taxable supply.

What are the penalties for late VAT filing or payment?

Late returns are subject to a penalty of 5 percent to 25 percent of the unpaid VAT.

Is e-invoicing mandatory in Saudi Arabia?

Yes. Saudi Arabia's Fatoora e-invoicing system requires businesses to issue and manage electronic invoices in accordance with ZATCA requirements. The first phase, covering invoice generation, began in December 2021, followed by the integration phase from January 2023.

What VAT documents must businesses issue?

A taxable person must adjust the value of a supply through a credit note or debit note in the applicable cases where a tax invoice has already been issued.

What are zero-rated supplies?

Zero-rated supplies are taxed at 0% VAT, allowing businesses to charge no VAT while generally retaining the ability to recover eligible input VAT.

What documentation is needed to support zero-rated treatment?

Businesses should retain supporting documentation, including relevant customs export documents, invoices, shipping records, and commercial contracts.

What is ZATCA?

The Zakat, Tax and Customs Authority (ZATCA) is the government authority responsible for administering and regulating Zakat, corporate income tax, VAT, customs, and other related tax obligations in Saudi Arabia.