How Zakat and Corporate Tax Apply to Mixed-Owned Firms

Companies operating in Saudi Arabia with a mix of Saudi and foreign owners are treated under two separate systems depending on who holds the shares: zakat for local ownership and corporate income tax for foreign ownership. Understanding this split matters for investors, business partners, and expat entrepreneurs planning to set up or expand in the Kingdom.

Under the rules, a mixed-ownership Saudi company pays zakat on the portion held by Saudi and GCC nationals, and corporate income tax on the portion held by non-Saudi and non-GCC shareholders. The tax base is divided so each share is assessed under its own regime.

The standard corporate income tax rate is 20% of the net adjusted profit attributable to foreign shareholders. The standard zakat rate is 2.5% of the company's zakat base for the Saudi and GCC ownership share.

What it means by ownership type

A company that is 100% foreign-owned but resident in Saudi Arabia is generally subject to corporate income tax only, at 20%. A company that is fully owned by Saudi or GCC nationals is generally subject to zakat only, at 2.5%. Businesses that fall between these two cases apply both, split by the ownership breakdown.

Filing and payment for both zakat and corporate tax are handled through the electronic services of ZATCA, the Zakat, Tax and Customs Authority. For anyone weighing a partnership or foreign investment structure in the Kingdom, the ownership mix directly shapes the annual obligation, making it a key factor to clarify early when setting up a company.

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