Understanding Zakat and Corporate Tax in Saudi Arabia: 2025 Guide for Investors

The Dual System: Zakat and Corporate Income Tax (CIT)

Saudi Arabia operates a dual tax system unlike any other in the GCC. Companies may be subject to Zakat, corporate income tax (CIT), or both — depending on their ownership structure and revenue sources.

For foreign investors, this creates both opportunities and obligations. Structuring your business correctly at the start is essential for optimizing tax exposure and avoiding costly errors in declaration or reporting.

NH Management advises clients across real estate, consulting, fintech, logistics, and manufacturing on how to navigate tax structuring, Zakat compliance, and audits from ZATCA.

Who Pays What?

Entity Type	Applicable Tax
100% Saudi-owned company	Zakat (2.5%) only
100% foreign-owned company	CIT (20%) on taxable income
Mixed ownership (Saudi + foreign)	CIT on foreign portion, Zakat on Saudi share
RHQ with tax incentives	0% CIT and WHT under RHQ regime (if compliant)
Free zone company (e.g. NEOM, KAEC)	May benefit from partial or full tax exemptions

Note: Foreign investors must also consider withholding tax (WHT) and VAT, which apply regardless of ownership.

Zakat: The KSA-Specific Wealth Tax

What is Zakat?

Zakat is a religious levy applicable to KSA nationals and GCC individuals/entities. It’s calculated at 2.5% of the Zakat base, which includes:

• Share capital

• Retained earnings

• Reserves

• Some liabilities (adjusted)

Zakat is filed annually with ZATCA (Zakat, Tax and Customs Authority) and paid at the same time as the income tax return.

NH Insight: Even if your business is foreign-owned, your KSA shareholders must declare Zakat separately. We help structure entities to ensure each partner’s tax liability is cleanly accounted for.

Corporate Income Tax (CIT): For Foreign-Owned Shares

The CIT rate in KSA is 20% on net taxable income.

Taxable items include:

• Trading profits

• Consulting and professional fees

• Rental income

• Royalties and licensing income

• Capital gains on sale of shares or assets

• Certain services billed cross-border

NH Management ensures your entity is bookkeeping- and audit-ready, with correct expense recognition, depreciation schedules, and transfer pricing support.

Withholding Tax (WHT)

Payments from Saudi entities to foreign parties are subject to WHT:

Payment Type	WHT Rate
Dividends	5–10%
Royalties and licensing	15%
Technical or consulting fees	15%
Interest	5%
Rent and lease payments	5%

These may be reduced under Saudi Arabia’s double tax treaties. NH Management handles all WHT registration and relief applications.

VAT in KSA

• Standard rate: 15%

• Applies to most goods and services

• Mandatory registration if turnover exceeds 375,000 SAR per year

• Reverse charge mechanism applies to imports of services

• Monthly or quarterly VAT filing (based on turnover)

We register clients with ZATCA, manage filings, and align intra-group invoices with VAT and transfer pricing best practices.

ZATCA Filing Requirements

Filing	Deadline
VAT Return	Monthly or quarterly
Zakat / CIT Return	Within 120 days of fiscal year-end
Withholding Tax Payments	Monthly
Transfer Pricing Disclosure	Required for intercompany transactions exceeding threshold

ZATCA has increased audit activity and expects Arabic-language submissions, local records, and contemporaneous documentation.

Transfer Pricing Rules (TP)

As of 2024, KSA enforces BEPS-aligned TP rules, including:

• Master file and local file for qualifying groups

• Country-by-Country Reporting (CbCR) for MNEs

• Mandatory TP disclosure form

• TP policies must be market-based and defensible

NH Management works with tax advisors to ensure your intercompany transactions, management fees, and royalty structures are defensible and properly filed.

Structuring for Tax Efficiency

We help clients:

• Optimize shareholding structure to reduce Zakat/CIT burdens

• Use holding companies in treaty jurisdictions for dividend and royalty flows

• Separate operating and asset-holding entities for real estate or franchise businesses

• Leverage RHQ tax exemptions if qualifying under the Vision 2030 RHQ framework

• Ensure intercompany agreements are fully documented

Final Thought: Tax Strategy Starts With Setup

In KSA, the tax system is predictable — but only if you understand its mechanics. Zakat, CIT, and WHT can be optimized through entity structure, treaty planning, and proper documentation.

NH Management ensures your business is not only registered, but structured to scale, protected from audit risk, and positioned to benefit from incentives.

Need help structuring your business or filing tax returns in KSA? NH Management provides full-service tax registration, ZATCA filings, treaty applications, and audit support. Get in touch!