Zakat vs Corporate Tax in Saudi Arabia: The Rules
Companies operating in Saudi Arabia are treated differently for tax purposes depending on who owns them, with the split determined by whether ownership is Saudi/GCC or foreign. Understanding the distinction matters for local firms, expat-run businesses, and investors weighing where to base operations.
Entities owned by Saudi or GCC nationals generally pay zakat at a rate of 2.5% of the zakat base. By contrast, foreign-owned entities are generally subject to corporate income tax (CIT) at 20% on the foreign-owned share of taxable income. A company that is 100% foreign-owned is taxed at 20% on all of its taxable income.
Mixed ownership is split proportionally
For businesses with combined Saudi/GCC and foreign ownership, the treatment is applied proportionally. The Saudi or GCC-owned share of the business is subject to zakat, while the non-Saudi and non-GCC share is subject to corporate income tax. This means a single company can face both zakat and CIT depending on its ownership structure.
It is important to note that these charges are not flat fees. Zakat is calculated as a percentage of the zakat base, and CIT is calculated as a percentage of taxable income, so the amount owed varies from one business to another based on its financial results.
Filings and payments for both zakat and corporate income tax are handled through the electronic tax channels operated by ZATCA. Recent 2026 guidance remains consistent with the main rule: 20% corporate income tax applies to foreign ownership, and 2.5% zakat applies to Saudi and GCC ownership. For residents and business owners, keeping ownership records accurate is the key factor in determining which treatment applies.
Stay updated with the latest news, events, sports updates, business insights, real estate and lifestyle stories on Saudi Living — the leading online platform for residents, expats, and visitors in Saudi Arabia.
Follow Saudi Living for daily updates:
- Instagram - @saudiliving
- X - @saudiliving
- Facebook - @saudiliving
- YouTube - @saudiliving
Up Next
VAT Guide 2026: Registration and Filing for New Businesses
New businesses in Saudi Arabia must register for VAT at SAR 375,000 taxable supplies, with a 15% rate and monthly or quarterly filing in 2026.
Aug 10,2026
Saudi Commercial Registration: Fees and How It Works
A practical guide to commercial registration in Saudi Arabia: CR fees for companies and establishments, annual confirmation, and official channels.
Aug 9,2026
MISA Foreign Investment Licence: Types & How to Apply
A guide to MISA foreign investment licence categories, required documents and the online application steps for investors in Saudi Arabia.
Aug 9,2026
Tadawul Opens to All Foreign Investors in 2026
Tadawul's Main Market is now open to all foreign investors after the QFI framework was abolished on 1 February 2026. Here's what changes for expats.
Aug 9,2026Related Stories
Don't Miss Similar Listings
Be the first to know when new stories on this topic are published.
