Business Taxes in Saudi Arabia: VAT, Zakat, Tax

Businesses operating in Saudi Arabia continue to navigate three main tax obligations in 2026: Value Added Tax (VAT), Zakat, and corporate income tax. Understanding which applies depends largely on how a company is owned.

VAT remains set at 15%, a rate unchanged since 1 July 2020. Companies must register for VAT once their annual taxable supplies reach SAR 375,000, while businesses with supplies of at least SAR 187,500 may register voluntarily. Registration, filing, and payment are all handled through the tax authority's online services.

Zakat vs. corporate income tax

The distinction between Zakat and corporate income tax comes down to ownership. Zakat is charged at 2.5% of the Zakat base on the Saudi and GCC-owned share of a company. Corporate income tax applies at 20% on the non-Saudi, non-GCC ownership share of taxable profit.

In practice, a fully Saudi-owned company is generally subject to 2.5% Zakat rather than corporate income tax, while a wholly foreign-owned company is generally taxed at 20% on its profits. A mixed-ownership business typically pays Zakat on the Saudi and GCC share and corporate income tax on the foreign share. Corporate income tax payments are also processed through the tax authority's online services.

E-invoicing remains mandatory for covered businesses, making digital record-keeping an essential part of compliance. For residents and expats running or planning a business in Riyadh, Jeddah, or elsewhere in the Kingdom, knowing these thresholds and rates helps in budgeting, pricing, and choosing an ownership structure from the outset.

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