Zakat and Income Tax Rules for Mixed-Ownership Firms

Resident capital companies in Saudi Arabia that combine Saudi or GCC ownership with foreign ownership are subject to both zakat and corporate income tax, calculated strictly in proportion to each ownership share. The rules clarify how mixed-ownership firms and cross-border transactions are treated for the current filing periods.

Under the framework, the Saudi and GCC ownership share of a resident company is subject to zakat at 2.5% of the zakat base for a Hijri year, or roughly 2.577–2.578% when the company follows a Gregorian fiscal year. The foreign, non-GCC share is subject to corporate income tax at 20% on its portion of the net adjusted profit. The standard 2.5% zakat rate and the Gregorian-equivalent rate of about 2.577% continue to apply in practice in 2025–2026.

A mixed-ownership entity files one integrated annual return covering zakat, corporate income tax, and withholding tax. The company first computes its full accounting net profit and zakat base, then allocates the base to the Saudi/GCC portion (taxed at 2.5% or ~2.577%) and the taxable income to the foreign portion (taxed at 20%). Shares held by non-Saudis in mixed companies that are partners in resident capital companies are not treated as Saudi shares and remain fully subject to corporate income tax.

Companies wholly owned by Saudi or GCC nationals — directly or indirectly, with no non-GCC owner in the chain — are subject only to zakat, while companies wholly owned by non-Saudi, non-GCC owners are subject only to the 20% income tax. Non-residents doing business in the Kingdom through a permanent establishment or branch pay 20% corporate income tax on that unit's profits.

These distinctions matter for business owners, investors, and finance teams, as they determine filing obligations and effective rates. Parent companies with fully owned subsidiaries sharing the same ownership percentages may be permitted to submit consolidated zakat declarations, subject to approval by the tax and zakat authority.

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