Article 43 specifies the tax treatment for capital companies, particularly partnerships limited by shares. It mandates that the shares of general partners are taxed as they would be in a standard partnership, and these shares are deducted when determining the partnership's tax base. A key provision restricts the deduction of a non-Saudi partner's share of losses incurred before a significant ownership change. If a capital company's ownership or control changes by 50% or more, prior losses cannot be offset in subsequent years, unless the company maintains the same business activity. A share transfer under Article 9(m) is exempt.
Chapter 9 - Rules of Taxation on Capital Companies
Article 43 - General Provisions
A tax shall be imposed on the shares of general partners in a partnership limited by shares, as in a partnership. Henceforth, the general partners' shares shall be deducted in determining the tax base of the partnership. The provisions of this Law which are applicable to partnerships shall apply to the shares of general partners in partnerships limited by shares.
In case of a change of 50% or more in the ownership or control of a capital company, no deduction is allowed for non-Saudi share of the losses incurred prior to the change according to Article 21 of this Law in the taxable years following the change, [unless the company continues to practice the same activity].
[The transfer of shares mentioned in paragraph (m) of Article 9 of these regulations is not considered a change in the ownership or control of the capital company.] .
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