Business Taxes in Saudi Arabia: VAT, Zakat & CIT

Business owners and investors in Saudi Arabia work under a dual tax system that combines Value Added Tax, Zakat, and corporate income tax. Knowing which obligations apply is essential for companies operating in Riyadh, Jeddah, and across the Kingdom, with all filings handled through ZATCA.

Value Added Tax remains at a standard rate of 15% on most goods and services, unchanged since 1 July 2020. Businesses that reach SAR 375,000 in annual taxable supplies must register for VAT. As things stand, no change to the 15% rate has been announced, so the current framework of 15% VAT, 2.5% Zakat, and 20% corporate income tax continues to apply.

Zakat versus corporate income tax

The key difference lies in ownership. Entities owned by Saudi and GCC nationals generally pay Zakat at a rate of 2.5%, calculated on the zakat base rather than accounting profit. Businesses owned by non-Saudi or non-GCC investors generally pay corporate income tax at 20% on net adjusted profits, or the taxable income attributable to that foreign ownership share.

A fully foreign-owned company pays 20% on all its taxable profit. Mixed-ownership companies split their liability, paying Zakat and corporate income tax

For the community of residents, entrepreneurs, and expat business owners, understanding these categories helps with accurate registration, correct filing, and avoiding penalties. Whether a company falls under Zakat, corporate income tax, or a combination of both depends primarily on who owns it — and all three obligations, along with VAT and customs, are administered by a single authority.

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