JEDDAH, 19 January — The Ministry of Finance and National Economy has returned the proposed new tax regulations to The High Economic Council after making the necessary modifications to it. The new regulations will be more clear and transparent compared to the old regulations, with regards to foreign investors.
It was said that the taxes on foreign companies' profits will not exceed the percentage already set in the regulations of foreign investments, in which the tax percentage was reduced from 45 percent to 30 percent. The reduction of tax percentage is not the only advantage, but the procedure which the foreign investor has to follow when he is settling his taxes are more clear.
One of the significant features of the new system, is the fixing of a certain date to submit the final accounts statement of the company, conditions and previsions of its acceptance, rejection reasons in addition to the naming of the exempted expenses and the funds which will be included in the taxable income (basis of assessment).
The Saudi investor and all local companies in all activities will be excluded from this new tax system. They will be subjected to Zakat only as declared by EC.
The ministry of finance suggested, when the new regulations were first brought before the EC, of imposing income tax on Saudi investors, because Zakat is a tax on capital, and not on profits. But the EC decided on the Zakat only.
The Saudi government has decided the tax percentages on profits of foreign investment companies, in compliance with the resolution of the Council of Ministers (Cabinet) which states the State will shoulder 15 percent of the tax imposed on the companies' profits which exceeds SR100,000 per year. The resolution also allows the carry over of losses to the coming years without a certain limit.
Minister of Finance Dr. Ibrahim Al-Assaf said that the resolution excluded the companies operating in Oil, Gas, and Hydrocarbon production.
Dr. Assaf explained that the shouldering of this percentage will be limited to the profits greater than SR100,000 per year. Based on that the tax will be collected according to four categories of companies: the first include the companies whose profits of SR100,000 - SR200,000 with a tax of 25 percent, second SR200,001- SR500,000 with a tax of 20 percent instead of 35 percent, the third include the companies whose profits SR500,001-SR1000,000 with a tax of 25 percent instead of 40 percen, and the fourth whose profits are above SR1,000,000 the tax will be 30 percent instead of 45 percent.
For the companies with profits less than SR100,000, they will be taxed with 25 percent of the net profits. The net losses that can be carried over will be equal to the operational losses regardless of its book value.
