JEDDAH, 29 April 2003 — Saudi businessmen have welcomed yesterday’s Shoura Council decision to cut taxes on profits of foreign companies from 45 percent to a maximum of 25 percent, saying the move will boost foreign investment in the Kingdom.
“The Shoura approved the 69-article law and will forward it to the Council of Ministers” for endorsement, Hamoud Al-Badr, secretary-general of the Council told reporters.
The 120-member Council in January rejected an article in the legislation suggesting an income tax levy of around 10 percent on the salaries of some seven million expatriate workers earning more than SR3,000 ($800) a month.
But the law, which becomes effective after approval from the Cabinet, also stipulates a maximum of 85 percent tax on gas and hydrocarbon projects, a field almost totally off-limit to foreign investors.
The Kingdom has been negotiating with eight oil giants the implementation of three major gas projects requiring initial investments of some $25 billion. Talks have reached final stages on two projects while the third has been temporarily shelved for further economic assessment.
The new legislation offers certain tax exemptions, especially for spending on research, development and geological surveys, and allows losses to be carried over from one year to the next.
In joint ventures with Saudi partners, taxes are imposed on the foreigners’ share. Saudi and Gulf Arab businesses already pay zakat, which works out to 2.5 percent of a firm’s annual turnover.
International airlines operating in the Kingdom will pay an annual tax of five percent on sales of tickets, freight and mail.
Saudi Arabia is projecting a $10.4-billion budget deficit for fiscal 2003, but economists predict the deficit will be wiped out due to high oil prices. The Saudi Arabian General Investment Authority has licensed 1,782 industrial, agricultural and service projects worth SR51 billion ($13.6 billion) since its inception in 2000.
