Mixed-Ownership Firms: Zakat and Tax Rules in KSA

Companies in Saudi Arabia that combine Saudi or Gulf and foreign ownership are subject to a dual financial system for 2026: Zakat on the share held by Saudi and GCC investors, and Corporate Income Tax (CIT) on the share held by non-Saudi and non-GCC investors. The same legal entity files and pays both, in proportion to who owns what.

Under the rules, the Zakat rate is 2.5% applied to the portion of the Zakat base attributable to Saudi and GCC shareholders. The corporate income tax rate is 20%, applied to net adjusted profits attributable to foreign shareholders. GCC shareholders are treated the same as Saudi nationals, meaning their share falls under Zakat rather than tax. Importantly, the two amounts cannot be offset against each other; each is calculated and paid separately.

A simple example illustrates the split: a resident company owned 60% by Saudi investors and 40% by foreign investors pays Zakat on the 60% share and CIT on the 40% share. The Zakat base is broadly the entity's net worth, covering equity, long-term liabilities, retained earnings and certain reserves, minus fixed assets and other deductible items. The CIT base is net adjusted profits after allowable deductions, applied only to the foreign-owned portion.

For filing, mixed-ownership companies submit a single return that contains separate Zakat and CIT sections. The deadline for both is 120 days after the end of the fiscal year for resident companies. Late filing or payment is subject to penalties applied to the relevant Zakat or CIT component, with amounts varying case by case. Both Zakat and CIT for companies, including mixed-ownership entities, are administered by the Zakat, Tax and Customs Authority (ZATCA).

For business owners and expat entrepreneurs, understanding this split matters when structuring ownership and planning cash flow, since the tax and Zakat obligations are calculated on different bases and settled separately.

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