There are specific rules for payroll and taxation in Saudi Arabia, depending upon the type of company structure chosen. The primary concerns for a foreign company that needs to comply with tax laws in Saudi Arabia are: individual income tax, social security costs, payroll tax, sales tax, withholding tax, business (Zakat) wealth tax and permanent establishment concerns.
Information
Explanation
Remote Payroll
A remote payroll in Saudi Arabia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Saudi Arabia. One option for a non-resident company to payroll its employees (local and foreign) in Saudi Arabia is to use a fully outsourced service, which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Saudi Arabia under one of the forms available, but might prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. The payroll calculations, payments and filings can however, all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to Saudi Arabia may wish to run their own local payroll folr all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who possess the relevant background necessary to manage a Saudi Arabian payroll, and can also fulfill all tax, withholding, and payroll requirements.This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Saudi Arabian employment laws.
Tax Figures
Information
Explanation
Corporate Income Tax
20% of net adjusted profits.
Income Tax Rate
Grossed incomeTax Rate (%)0-∞0%*Employment income and allowances, including education allowances, received by expatriates is not subject to tax in Saudi Arabia.
Payroll Tax
N/A
Sales Tax
N/A
Withholding Tax
Withholding Tax is applied to payments to a non-resident party.Dividend WHT 5%Interest WHT 5%Royalty WHT 15%These figures can be reduced by treaty agreements. Withholding Tax is payable within 10 days of the month following the initial payment.
