JEDDAH, 21 February 2007 — Saudi Arabia’s new income tax law and its bylaws were in focus yesterday at a seminar held at the Jeddah Hilton. The seminar was organized by Dr. Abdullah Baeshen, country coordinating partner and managing partner of Ernst & Young Jeddah, one of the world’s largest professional services firms.

The presentation by Mohammed Saleem Desin, Richard Chatwin, Mohammed Yaghmour and Irfan Alladin emphasized the update to the new tax law and its bylaws as well as clarifications issued by the Department of Zakah and Income Tax (DZIT) applicable to all Saudi businesses for fiscal years ended after July 30, 2004 whether they are taxpayers or not under the new law.

“The main objective of the seminar was to inform participants about the updates on new tax law, comparison of disallowable expenses between the new tax law and its bylaws, supporting documentation, recent trends of tax audits undertaken by the DZIT, recent rulings of appeal committees, update of Zakah matters as well as latest tax treaties signed by Saudi Arabia with other countries including their effect on the taxation of all businesses.”

About 125 executives, bankers and accountants who were among the participants were keen to learn about the developments, updates on new income tax law and its bylaws as well as Zakah matters and its implications on their businesses.

Richard Chatwin gave a brief introduction about the seminar.

Desin in his presentation explained some of the major updates on basis of taxation and major withholding tax issues arising out of dealings with non resident entities. He explained a Saudi source of income earned by non-residents without having a permanent establishment is subject to withholding tax at flat rates from 5 to 20 percent. He also explained the various clarifications issued by the DZIT in respect of withholding tax. Desin also pointed out that sale of shares by a non resident in a resident company is subject to capital gains tax at 20 percent.

Irfan Alladin presented the comparison of disallowable expenses between the provisions of new tax law and its bylaws as the byelaws introduced certain addition disallowable costs. He said “All the ordinary and necessary expenses of earning income subject to tax whether paid or accrued by the taxpayer, and incurred during the taxable year, are deductible in determining the tax base, with the exception of outlays of a capital nature and expenses that are nondeductible.” Alladin also discussed supporting documentation required for major expenses under allowable cost.

Yaghmour explained recent tax audits. He focused on the supporting documents that the DZIT inspectors need in order to allow certain amounts as valid tax deductible expense. In addition the recent trend of DZIT inspectors in conducting the field tax audits and the provisions of new tax law and its bylaws for conducting these tax audits were also discussed. He also discussed the recent appeal rulings on major issues such as bonuses paid to employees, donations, reopening of assessments, salaries of employees not on company’s sponsorship etc.

The final session summarized and discussed the tax treaties between Saudi Arabia and France, China, India, Malaysia and Pakistan. In addition, the tax treaties for air and shipping transport with various countries were also discussed. Similar presentations were made by Ernst & Young in Alkhobar on Sunday and in Riyadh, yesterday through their offices in Alkhobar and Riyadh. In addition, a similar presentation will be held in Bahrain today.

Ernst & Young consists of 106,000 employees in more than 670 cities in 140 countries. Ernst & Young Saudi Arabia has been in operation since 1967. The Saudi Arabian offices of Ernst and Young in Jeddah, Riyadh and Alkhobar are engaged in providing professional services such as auditing and accounting, tax and Zakah consulting and compliance, business advisory and consulting and business community training.