The ZATCA, VAT & Corporate Tax
Guide to Saudi Arabia

ZATCA — the Zakat, Tax and Customs Authority — administers Saudi Arabia's tax system in a single integrated body. For foreign-owned companies, five regimes matter:

Corporate income tax (CIT). 20% on net taxable profit attributable to non-Saudi/non-GCC ownership. Annual filing within 120 days of fiscal year-end.

Zakat. 2.5% on the Saudi/GCC ownership component, calculated on a Zakat base (broadly net assets adjusted). Annual filing alongside CIT.

VAT. 15% standard rate (since 2020), monthly or quarterly filing depending on turnover. Mandatory registration above SAR 375K turnover; voluntary above SAR 187.5K.

Withholding tax (WHT). 5–20% deducted from payments out of Saudi Arabia to non-residents, by payment category. Monthly filing within 10 days of month-end.

Excise tax. Specific categories — tobacco, sweetened drinks, energy drinks. Largely irrelevant for most foreign B2B operators but important for FMCG.

CIT applies at 20% on the taxable profit attributable to non-Saudi and non-GCC ownership. A 100% foreign-owned LLC pays 20% on the full taxable profit. A joint venture at 60% Saudi / 40% foreign pays CIT on 40% of taxable profit and Zakat on 60% of the Zakat base.

RHQ exception. Companies licensed under the Regional Headquarters Programme pay 0% CIT and 0% withholding on RHQ-related activities for 30 years from licence issue. The RHQ exemption does not extend to operational LLCs paired with the RHQ — those continue under the standard 20% regime.

Deductible expenses. Generally aligned with international norms — salaries, rent, depreciation, interest (with thin-cap limits), professional fees. Disallowed: provisions (must be actual losses), most foreign withholding taxes, fines, donations beyond statutory limits.

Loss carry-forward. Indefinite, but capped at 25% of current-year taxable profit per year. So a SAR 4M loss takes a minimum of 4 profitable years to fully utilise.

Filing. Annual return within 120 days of fiscal year-end. Audited financials required for entities above SAR 30M revenue. Tamra's tax desk files for clients across all sizes.

Saudi VAT moved to 15% in July 2020 (up from 5%). The standard regime applies to most B2B transactions; zero-rating applies to exports, international transport and a defined list of supplies; exemptions cover specific financial services, residential rental and education in narrow circumstances.

Filing cadence. Monthly for entities above SAR 40M turnover, quarterly otherwise. Filing and payment within 30 days of period-end.

Fatoora — Phase 1 (Generation). Live since December 2021. All B2B and B2C invoices must be generated electronically in a structured format (XML or PDF/A-3 with embedded XML), with QR code, ZATCA-compliant fields and sequential numbering.

Fatoora — Phase 2 (Integration). Rolling since January 2023, by waves of taxpayers. Invoices must be transmitted to ZATCA's platform in real time (or near real time for B2C) and cleared before being shared with the customer. Most foreign-owned LLCs of any meaningful size are now in Phase 2.

Fatoora compliance is operational, not theoretical. Non-compliance triggers automatic penalty letters — typically SAR 1,000–50,000 per violation. Tamra runs Fatoora-compliant invoicing for clients via integrated ERP/accounting connectors.

When a Saudi entity pays a non-resident — for management fees, royalties, technical services, dividends, interest, rent — it must withhold tax at source and remit to ZATCA monthly. The rate depends on the payment category.

5%. Dividends; payments for technical and consulting services rendered outside Saudi Arabia.

5–15%. Interest payments (depends on counterparty).

15%. Royalties, including software licence fees; management fees paid to overseas head office; rent for moveable property.

20%. Payments to related parties in tax havens or non-cooperative jurisdictions.

Treaty relief. Saudi Arabia has DTTs with 50+ countries reducing many of these rates — UK, France, Germany, China, India, Singapore among them. Claiming treaty relief requires tax-residency certificates and, in some cases, advance ZATCA approval.

The most common error: a foreign group invoices its Saudi sub for 'shared services' or 'IT licence fees' and forgets the 15% withholding. ZATCA reconciles intercompany flows during audit. The shortfall plus penalty plus interest typically exceeds the original payment.

Transfer pricing. Mandatory documentation above SAR 6M in related-party transactions, OECD-aligned (master file, local file, country-by-country report for groups above EUR 750M). Filed alongside the annual CIT return. Saudi has fully signed up to BEPS Action 13.

Audit posture. ZATCA has materially professionalised since 2022. Risk-based audit selection, dedicated multinational audit teams, faster turnaround, fewer informal resolutions. Most foreign-owned groups can expect at least one substantive audit within their first three years of Saudi operation.

Penalties. Late filing: 1% of tax due per 30 days, capped at 25%. Late payment: 1% per month uncapped. Underpayment uncovered on audit: 25–50% of the shortfall plus interest.

The right discipline. Monthly: VAT return, withholding tax return, Fatoora hygiene. Quarterly: management accounts reconciled to tax positions. Annual: CIT return with audited financials, transfer-pricing documentation, intercompany reconciliation. Tamra's tax desk runs all of this as a managed service for client groups.