Saudi Arabia: What You Need to Know About the Country
Saudi Arabia combines a conservative legal system with ambitious legislative reforms. This makes the country attractive for technology, energy and infrastructure projects. The tax burden is moderate, but requires taking into account local requirements. Business success depends on integration into national priorities (Vision 2030) and adaptation to cultural norms.
Legal system
Sources of law
- Quran and Sunnah.
- International treaties (if they do not contradict Sharia).
- The Basic Law of Governance is an analogue of the Constitution that defines the structure of the state and the rights and obligations of citizens.
- Royal decrees and ordinances (Nizams) are the main instruments of legislation, issued by the monarch and regulating a wide range of issues, including the economy, trade and social relations.
- Decisions of ministries, like by-laws, regulate special and narrower issues.
Reforms within the framework of Vision 2030
- Companies Act (2023): Simplifying business registration.
- Bankruptcy Law (2018): protection of the rights of creditors and debtors.
- Intellectual property: integration into the international system of intellectual property protection, tightening the fight against piracy.
Trends
Vision 2030
- Reducing dependence on oil: the goal is 50% of GDP from non-oil sectors by 2030.
- Megaprojects: NEOM, Red Sea Project, Qiddiya.
Digitalization
- The growth of the fintech industry.
- Focus on Artificial Intelligence: National AI Strategy 2030.
Growing the Startup Ecosystem
- Accelerators Misk Innovation, Flat6Labs.
- Increase in venture capital investments (+67% in 2023).
Localization of production
- Iktva program (60% localization in the oil and gas sector).
- Creation of industrial clusters (Ras Al-Khair, Wa'ad Al-Shamal).
Taxes
VAT
The tax rate depends on the transaction and can vary from 0% to 15%. For example, office lease transactions and domestic transportation are taxed at a rate of 15%; real estate sales transactions on the primary market are taxed at a rate of 5%; a 0% rate is also applicable to the export of goods outside the GCC countries and the provision of services to non-residents of the GCC countries. There are a number of transactions exempt from VAT, including: the provision of financial services, medical and educational services.
Income tax
It is divided according to the principle of "two worlds in one system". There is a general income tax - 20%, which is paid by companies with foreign participation. There is Zakat with a rate of 2.5% - it is paid by companies owned by citizens of GCC countries. These rates can be combined with each other if the company is owned by both citizens of GCC countries and citizens of other countries. For companies in the oil and gas sector, the tax rate varies from 30% to 85%.
Tax at source
Both residents and non-residents pay. The tax rate depends on the taxable transaction and can range from 5% to 20%. Payments between GCC residents are exempt from withholding tax.
Personal Income Tax
There is no direct tax on personal income in Saudi Arabia. This means that salaries, dividends, interest on deposits and other types of income of citizens and residents of the kingdom are not subject to income tax.
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