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Document Type: BL - Bylaws
Law: Income Tax Law (Royal Decree No M/1 - 21 Feb 2004)
Decision Number: 1535-article-5
Year: 2019
Country: 🇸đŸ‡Ļ KSA
Official Name: Article 5 - Sources of Income

Ministerial Resolution No. 1535 of 2004 [Executive Bylaws]

Executive Regulations of the Income Tax System

Article 5 - Sources of Income

The following types of income shall be considered to be derived from an activity occurring in the Kingdom and are therefore deemed to have originated from a source in the Kingdom:

  1. Loan returns in any of the following cases:

    1. the debt is secured by movable or immovable property located in the Kingdom,

    2. the borrower is a resident in the Kingdom,

    3. the loan is connected to an activity carried out in the Kingdom through a permanent establishment.

      "Loan returns" means an amount paid for the use of money. This includes income realized from loan transactions of any type, whether secured or unsecured, and whether or not they grant the right to participate in the Borrower's profits. This also includes income derived from government and non-government bonds. Excluded from the above are loan returns resulting from interbank deposits, if the deposits remained with the resident borrowing bank for a maximum period of 90 days, provided the borrowing bank submits an annual statement attested by Saudi Arabian Monetary Authority (SAMA) specifying the names and addresses of the lending banks, the period of loan and the amount of interest paid.][4]

  2. Insurance/reinsurance premiums in any of the following cases:

    1. The insured property is located in the Kingdom,

    2. The insurer is a resident in the Kingdom,

    3. The insurance of activities or risks related to activities carried out in the Kingdom.

  3. Income derived from technical or consulting services in any of the following cases:

    1. The service is provided to a person resident in the Kingdom

    2. The service is related to an activity carried out in the Kingdom.

  4. [Income earned by a resident capital company in the Kingdom from its operations and the operations of its branches inside and outside the Kingdom.][5][6]

  5. Income derived from movable or immovable property related to or arising from activities in the Kingdom, carried out by a person resident in the Kingdom.

  6. Income derived from sale of goods or merchandise manufactured or produced in the Kingdom.

  7. [Contracts for the supply of goods into the Kingdom, including shipping and insurance contracts, are not considered as arising from an activity in the Kingdom unless they include accompanying services such as inland transport, installation, maintenance, training or similar activities performed in the Kingdom. In such cases, only the accompanying services only are deemed to arise from activity in the Kingdom][7].

Footnotes

[4]Inserted by MR No. 1776 dated 18/5/1435H (19/3/2014)

[5]Amended by MR No. 1727 dated 25/05/1439H (11 Feb 2018). Prior to the amendment, Para 4 read as follows:

"Income resulting for a company residing in the Kingdom from its operations and branches in Kingdom and outside the Kingdom provided the following:

  1. With respect to the income generated from investments in another capital company resident in the Kingdom, and for the purpose of avoidance of double taxation, no tax should be assessed on such income whenever the following conditions are met:

    1. The underlying income was already subject to tax in the Kingdom.

    2. The shareholding percentage in the investee company should not be less than 10%.

    3. The ownership of the shares should not be less than one year.

  2. With respect to the income generated from the investments and operations outside the Kingdom tax should be assessed in the Kingdom unless the Agreement for the avoidance on a reciprocal basis for double taxation signed between the Kingdom and the Country where the investment is carried out states the contrary."

[6]Prior to the amendment by MR No. 1727 dated 25/05/1439H (11 Feb 2018), there was an earlier amendment by MR No. 3294 dated 15/11/1431H (22/10/2010). Prior to this amendment, Para 4 read as follows:

"Income derived by a capital company resident in the Kingdom from its operations and of its branches inside and outside the Kingdom."

[7]Amended by MR No. 185/1709 dated 23/07/1426H (28 Aug 2005). Prior to the amendment, Para 4 read as follows:

"Contracts for the supply of goods into the Kingdom are not considered as arising from an activity in the Kingdom unless they include accompanying works such as transportation, installation, maintenance, training or other works performed in the Kingdom. In this case, only the accompanying works are deemed to arise from activity in the Kingdom."