Except for land, depreciation may be deducted for a taxpayer's depreciable tangible or intangible assets which lose value because of wear and tear or obsolescence and which are used, in whole or in part, in the generation of taxable income, and remain to have value after the end of the taxable year.

Depreciable assets are classified into groups and depreciation rates as follows:

1. Stationary buildings: 5%.

2. Movable industrial and agricultural buildings: 10%.

3. Factories, machines, engines, hardware, software (computer software), and equipment, including passenger and cargo vehicles: 25%.

4. Expenses for geological surveying, drilling, exploration, and other preliminary work to exploit natural resources and develop their fields: 20%.

5. All other tangible and intangible depreciable assets not included in the previous categories, such as furniture, planes, ships, trains, and goodwill: 10%.

The depreciation deduction for each group is determined in accordance with paragraphs (d) to (l) of this Article.

The depreciation deduction for each group is calculated by applying its depreciation rate as determined in accordance with paragraph (b) of this Article against the balance of the value of such group at the end of the taxable year.

The balance of the value of each group at the end of a taxable year is the total of the balance of the value of the group at the end of the previous taxable year after the deduction of depreciation in accordance with this Article for the previous taxable year, plus 50% of the cost base of assets put into use during the current and preceding taxable year, less 50% of the compensation received from the assets disposed of during the current and preceding taxable years, provided that the balance does not become negative. [The value of consideration of distributed or transferred assets mentioned in paragraph (M) of Article 9 and paragraph (C) of Article 10, is calculated in accordance with the cost basis specified in paragraph (M/1) of Article 9 of this Law.]^[18]

If the taxpayer converts its assets to personal use or if the asset ceases to be used in the generation of taxable income, this action by the taxpayer shall be deemed to be a disposal of the asset for its market value.

When 50% of the compensation of the assets disposed of during the current and previous taxable years exceeds the balance of the value of the group at the end of the taxable year, regardless of the amount of such compensation, the value of the group shall be reduced to zero and the excess is included in the taxpayer's taxable income.

If the balance of the value of the group at the end of the year, after allowing deductions in accordance with paragraph (d) of this Article, is less than 1,000 riyals, the amount of the balance may be deducted.

Where all the assets in a group are disposed of, the balance of the group may be deducted at the end of the year.

Where a land is bought or sold with constructions thereon, the value shall be reasonably apportioned to arrive at a separate value of the construction.

In case part of the assets is used for the generation of taxable income, a depreciation deduction is allowed for part of the asset value against the part of the asset used in the generation of the taxable income.

As an exception to the provisions of the previous paragraphs, assets under Build-Operate-Transfer (BOT) or Build-Own-Operate-Transfer (BOOT) contracts may be depreciated over the contract period or over the remaining period of the contract, if such assets are acquired or renewed during that period.