GTL Summary:

Article 40 of the KSA Income Tax Law establishes the tax treatment for a partner transferring personal assets into a partnership in exchange for a share. It stipulates that no gain or loss shall be calculated for this specific transaction. The value of the partner's acquired share is defined as the difference between the market value of the transferred asset and any amount paid to the partner. If the payment received by the partner exceeds the asset's market value, this excess amount is not treated as part of the transaction but is instead classified as a distribution from the partnership to the partner.

Document Type: Tax Law Article
Law: Income Tax Law (Royal Decree No M/1 - 21 Feb 2004)
Article Number: 40
Country: 🇸🇦 KSA
Location: Chapter 8 - Taxation Rules of Partnerships
Order: 40
Last updated at: 2025-12-19 09:23:03 UTC

Chapter 8 - Taxation Rules of Partnerships

Article 40 - Transfer of Property to a Partnership

No gain or loss shall be calculated for the transfer of a partner's assets to a partnership against acquiring a share in such partnership.
The partner is considered an owner of a share in the partnership equal to the difference between the value of the asset transferred by him to the partnership according to market prices and the amount paid to him. If the amount paid to him exceeds the market price, the excess amount shall be considered a distribution to the partner by the partnership.

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