GTL Summary:

Article 21 establishes the principle of tax loss carryforward in Saudi Arabia. It permits a taxpayer to carry forward a net operating loss to the subsequent taxable year, deducting it from the tax base of following years until the loss is fully offset. The Implementing Regulations are tasked with defining the maximum annual deduction limits. The Article defines a net operating loss as the excess of allowable deductions over taxable income. For natural persons, this calculation is restricted to their specific business activity. A key amendment prohibits offsetting losses between oil/hydrocarbons production and natural gas investment activities.

Document Type: Tax Law Article
Law: Income Tax Law (Royal Decree No M/1 - 21 Feb 2004)
Article Number: 21
Country: 🇸🇦 KSA
Location: Chapter 5 - Expenses of Earning Income
Order: 21
Last updated at: 2025-12-19 09:23:03 UTC

Chapter 5 - Expenses of Earning Income

Article 21 - Carrying forward of losses

  1. A net operating loss may be carried forward to the taxable year following the year in which the loss is incurred. The carried forward loss shall be deducted from the tax base of the following taxable years until the cumulative loss is fully offset. The Regulations shall specify the maximum limits which may be deducted annually.

  2. A net operating loss is the deductions allowed under this Chapter which are in excess of the taxable income for the taxable year.

  3. To calculate the net operating loss for a natural person, only the activity's deductions and income shall be taken into consideration.

  4. [Net operating losses from natural gas investment shall not be allowed from oil and hydrocarbons tax base. Similarly, net operating losses from oil and hydrocarbons may not be deducted from the tax base of a taxpayer engaged in both oil and hydrocarbons production and natural gas investment.] [20]

Footnotes

[20]Inserted by RD No M/70 dated 11/07/1439H (28 March 2018) with effect from 1 January 2018.

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