Saudi Arabia income tax is simple and predictable for expats and businesses. There is no personal income tax on employment salaries for all employees, including both Saudi and expatriate. Foreign businesses are subject to a 20% corporate income tax on profits tied to foreign ownership or a foreign permanent establishment (PE). VAT is 15% on most goods and services, and RETT (Real Estate Transaction Tax) is 5% on property transfers. Tax returns are due 120 days after the year-end.
Key Facts About Saudi Arabia Income Tax 2026
| Item | Rate | Applies To |
| Salary tax | 0% | All employees (no personal income tax) |
| Corporate income tax | 20% | Foreign-owned profit |
| Zakat | 2.5% | Saudi/GCC nationals |
| VAT | 15% | Goods and services |
| Withholding tax | 5%–20% | Cross-border payments |
| RETT | 5% | Property transfers |
Saudi Arabia Tax Cost Breakdown 2026
| Item | Rate | Applies To |
| Salary tax | 0% | All employees |
| Corporate income tax | 20% | Foreign-owned profits |
| Zakat | 2.5% | Saudi/GCC nationals |
| VAT | 15% | Most taxable supplies |
| Withholding tax | 5%–20% | Payments to non-residents |
| RETT | 5% | Property transfers |
Official Saudi Tax Sources
- ZATCA – Zakat, Tax and Customs Authority
https://zatca.gov.sa - Fatoora – The official e-invoicing system
https://fatoora.zatca.gov.sa - Saudi Ministry of Finance – Tax and regulation updates
https://mof.gov.sa
What Is Saudi Arabia Income Tax in 2026?
Saudi Arabia imposes a direct corporate income tax on foreign business profits, while personal salary income remains tax-free for all employees (both Saudis and expatriates). This makes the Kingdom attractive for global talent and companies. Here are the key points:
- Foreign Employees: 0% tax on salary income.
- Foreign Businesses: 20% corporate income tax on net adjusted profits tied to foreign ownership or a permanent establishment (PE).
- Saudi and GCC Nationals: 2.5% Zakat on equity and working capital.
Key Points You Need to Know
- No personal income tax on salary for employees, whether local or foreign.
- 20% corporate tax applies to foreign-owned businesses or profits linked to a foreign permanent establishment.
- Zakat applies to Saudi and GCC nationals, not foreign-owned businesses.
- VAT is 15% on most goods and services in Saudi Arabia.
These rules follow official guidance issued by Saudi Arabia’s ZATCA and Ministry of Finance for 2026 compliance.
Is There Income Tax on Foreign Salary in Saudi Arabia?
No, foreign employees in Saudi Arabia are not taxed on their salaries. This 0% salary tax system is one of the reasons the Kingdom is attractive to global talent. Your full monthly salary is paid without deductions for tax.
Benefits of Saudi Arabia’s Salary Tax System
- No income tax on salary for all employees.
- Employers contribute 2% to GOSI for workplace injury insurance.
- No personal income tax returns are required.
- Expatriates can focus on savings and investments, instead of dealing with complex tax filings.
Conditions for Salary Tax-Free Status
- Income must come from an employment contract.
- You must hold legal residency status in Saudi Arabia.
- Salary cannot be converted into business profit.
Who Must Pay Corporate Tax in Saudi Arabia?
If you are a foreign business owner or a non-resident entity earning income in Saudi Arabia, you are subject to corporate tax. The rate is a fixed 20% on net adjusted profits for most foreign businesses, with certain exceptions for specific sectors like oil and gas.
Who Needs to Pay Corporate Tax:
- Foreign-Owned LLCs: Must pay 20% tax on profits.
- Branches of Overseas Corporations: Must pay corporate tax on profits earned in Saudi Arabia.
- Permanent Establishments: Non-resident entities with a fixed place of business in Saudi Arabia must pay 20% tax.
- Service Providers: Foreign companies earning royalties or management fees from Saudi sources must pay tax on these profits.
For detailed updates on corporate tax rates and exemptions, visit the official ZATCA website and Saudi Ministry of Finance.
Saudi Arabia Corporate Tax Rate Structure for 2026
Saudi Arabia maintains a 20% corporate tax for most foreign-owned non-oil businesses. However, the rate may vary depending on the sector of activity. For instance, energy sectors like natural gas and oil production face higher tax rates.
Key Corporate Tax Rates
- Non-Oil Foreign Business: 20% on net adjusted profits.
- Natural Gas Investment: 20%-30%, depending on the size and type of the project.
- Oil Production: Up to 85% due to the strategic importance of the energy sector.
30-Year RHQ Tax Holiday
Approved Regional Headquarters (RHQ) in Saudi Arabia enjoy a 30-year exemption from corporate income tax and withholding tax on qualifying activities.
This incentive encourages multinational corporations to establish their regional offices in the Kingdom, benefiting from significant tax savings.
For businesses, correct classification is essential to avoid penalties and ensure compliance.
Zakat vs. Income Tax in Saudi Arabia
Saudi Arabia uses a dual tax system:
- Zakat applies to Saudi and GCC ownership, while income tax applies to foreign ownership.
- For mixed ownership companies, the Saudi portion is taxed under Zakat, and the foreign portion is taxed under corporate income tax.
Saudi Arabia follows a clear dual taxation structure that separates Zakat for Saudi and GCC ownership from corporate taxation on foreign profit. This distinction keeps financial obligations transparent for investors, partners, and mixed-ownership companies operating in the Kingdom. Understanding how Zakat and Saudi Arabia income tax apply in each case helps businesses plan accurately, avoid compliance risk, and maintain stable long-term growth under the 2026 regulatory framework.
Simple Comparison of Zakat vs. Income Tax:
| Element | Zakat | Income Tax |
| Who pays | Saudi and GCC owners | Foreign owners |
| Basis | Equity and working capital | Adjusted annual profit |
| Rate | 2.5% | 20% |
| Filing | Zakat return | Corporate tax return |
VAT in Saudi Arabia and Real Living Cost Impact
Saudi Arabia applies 15% VAT on most goods and services. While salary income remains tax-free, VAT impacts various daily purchases:
- Retail goods (clothes, electronics, etc.)
- Restaurants (dining bills)
- Utilities (water, electricity, telecom)
- Digital subscriptions (streaming services, memberships)
How VAT Impacts Your Budget
Although VAT is added to consumer goods and services, your salary remains tax-free, meaning you have a higher disposable income than in many other countries. Tracking your expenses and limiting VAT-heavy purchases can help manage the overall impact on your budget.
Withholding Tax on International Payments
Saudi Arabia charges withholding tax on payments sent abroad. This tax typically ranges from 5% to 15%, depending on the type of service. However, tax treaties with various countries may reduce this rate.
Common Taxed Payments Include
- Dividends: Taxed at 5%.
- Royalties: Taxed at 15%.
- Technical Services: Taxed at 5%-15%.
- Management Fees: Typically taxed at 15%.
Reviewing tax treaties can reduce Saudi Arabia income tax withholding rates and save money for your business.
Real Estate Transaction Tax (RETT) in Saudi Arabia
Saudi Arabia imposes a 5% real estate transaction tax (RETT) on property transfers. Unlike annual property taxes, RETT is paid once during the ownership transfer process.
What You Need to Know About RETT
- RETT Rate: 5% of the total sale price.
- No Annual Property Tax: After the transfer, there are no recurring property taxes.
- Exemptions: Some exemptions apply, such as for first-time buyers or family transfers.
Impact of RETT on Property Investment:
When buying or selling property, you must account for RETT as part of your investment budget.
Tax Residency Rules for Foreigners
A foreigner becomes a Saudi tax resident after staying in the Kingdom for more than 183 days within a year. Permanent housing can also establish residency. However, salary income remains tax-free for all employees, regardless of residency.
Key Points About Tax Residency
- 183-Day Rule: After 183 days in a year, you are a tax resident.
- Permanent Housing: Can also establish residency status.
- Treaty Benefits: Residency status grants access to double taxation treaties.
- Travel Records: The government tracks entry/exit through the Absher system.
ZATCA Registration and Tax Compliance Process
With mandatory ZATCA registration and the Fatoora e-invoicing system, businesses secure fast approval, maintain full compliance with Saudi tax rules, and avoid costly penalties in the Kingdom.
Foreign companies must register with ZATCA before starting any activity in Saudi Arabia. Late registration causes fines and operational delay. Early compliance protects legal status and supports a smooth business launch.
Registration steps
- Create a taxpayer account on the ZATCA portal
- Submit commercial registration and ownership details
- Declare shareholder nationalities clearly
- Receive the Tax Identification Number
- Activate the Fatoora e-invoicing system for compliant billing
Fatoora Phase 2 Integration
With the mandatory ZATCA registration and the Fatoora e-invoicing system, businesses must integrate their accounting systems directly with ZATCA’s platform using API keys as part of Phase 2 Fatoora compliance. This integration streamlines the tax filing process and ensures businesses are aligned with the latest compliance standards.
Accurate registration builds trust, prevents penalties, and keeps long-term Saudi Arabia income tax compliance stable.
Filing Deadlines and Penalties
Corporate tax returns must be filed within 120 days after the end of the financial year—failure to file on time results in penalties and monthly fines for late payments.
- Filing Deadline: 120 days from the year-end.
- Late Payment: Monthly fines of 1% of the unpaid tax.
- Under-reporting: Penalties of up to 25% of the tax difference.
June 30, 2026 Fine Waiver
The ZATCA Fine Waiver initiative is active until June 30, 2026, allowing businesses to settle principal tax debt with 100% exemption from late filing and payment penalties. This opportunity reduces the burden on businesses, providing a critical benefit during tax filing.
Business Link KSA provides expert support for ZATCA registration, Fatoora integration, and annual filings, helping your business comply with Saudi tax laws and avoid costly mistakes.
The Saudi Arabia income tax system is clear and predictable. By registering early, classifying your business correctly, and following the digital systems, you can avoid penalties and ensure long-term business growth.
Contact Business Link KSA for expert tax support in Saudi Arabia. via phone at +966115120997, WhatsApp at +966 54 424 0444, or email at connect@businesslink.sa
FAQs
Is there income tax in Saudi Arabia on salary?
No. Saudi Arabia has no personal income tax on employment salaries for both Saudis and expatriates
What is the corporate tax rate for foreign businesses?
Foreign-owned business profit is taxed at 20% on adjusted net profit.
Do expats file personal tax returns in Saudi Arabia?
No. Salaried expats file nothing. Self-employed foreigners file yearly returns.
What is the VAT rate in Saudi Arabia?
Saudi Arabia applies 15% VAT to most goods and services.
How much is the Real Estate Transaction Tax?
RETT equals 5% of the property transfer value.
Who pays Zakat in Saudi Arabia?
Saudi and GCC nationals pay Zakat. Foreign owners pay corporate income tax.
Do expats submit income tax returns?
Employees do not file. Business owners file Zakat or corporate tax through ZATCA.
What is the difference between Zakat and income tax?
Zakat applies to Saudi/GCC ownership. Income tax applies to the foreign profit share.
When is the ZATCA filing deadline?
Corporate tax returns are due within 120 days after the financial year end.
What happens if tax filing is late?
Late filing or payment triggers financial penalties under ZATCA rules.
Do consumers file VAT returns?
No. Businesses report VAT. Consumers only pay VAT in the price.
What is the withholding tax rate on royalties and fees?
Standard withholding tax is 15% for royalties and management fees.
What creates a permanent establishment in Saudi Arabia?
A fixed place of business or a dependent contract agent can create it.
What is Fatoora?
Fatoora is the ZATCA e-invoicing system required for VAT-registered businesses.
