GTL Summary:

This Article defines the scope of the Income Tax Law's application. It applies to resident capital companies regarding shares owned by non-Saudi persons and entities engaged in oil and hydrocarbon production. It clarifies that a resident capital company's tax base is independent of its shareholders. The Article also extends tax liability to non-residents conducting business through a permanent establishment or deriving income from Kingdom sources, outlining specific treatments for capital gains and natural gas investment activities.

Document Type: ERS - Executive Regulations
Law: Income Tax Law (Royal Decree No M/1 - 21 Feb 2004)
Decision Number: executive-regulations-1535-article-1
Year: 2019
Country: 🇸🇦 KSA
Official Name: Article 1 - Basic Provisions
Last updated at: 2026-02-23 12:13:39 UTC

Executive Regulations of the Income Tax System

Issued by Ministerial Resolution No.(1535) and the date 1425/6/11 AH And subsequent amendments thereto by ministerial decisions, the latest of which is Decision No.(2568) and the date 1440/8/12 AH.

Article 1 - Basic Provisions

  1. [The provisions of the Income Tax Law shall apply to:

    1. Resident capital companies, for shares owned directly or indirectly by non-Saudi persons, excluding their shares in resident capital companies whose shares are listed on the stock exchange and which are owned for speculation purposes through trading on the Saudi stock exchange.

    2. Shares owned directly or indirectly by persons engaged in the production of oil and hydrocarbon materials, whether they are natural or legal persons, resident or non-resident. This excludes shares owned directly or indirectly by persons engaged in the production of oil and hydrocarbon materials in capital companies listed on the Saudi stock exchange, and the shares of these companies owned directly or indirectly in capital companies.

    3. The tax base of a resident capital company shall be calculated independently of the tax base of its shareholders or partners, or its subsidiaries, even if consolidated for accounting purposes. Its share of profits or losses resulting from its investments, declared in accordance with the equity method, shall not be included in the base. Subsidiaries are defined as companies in which more than (50%) of the capital is owned or which have control over the formation of their board of directors.

    4. Non-resident persons, whether natural or legal, Saudi or non-Saudi, who conduct business in the Kingdom through a permanent establishment therein, or who derive income from sources in the Kingdom][1]

  2. A non-resident person, who derives income from sources within the Kingdom, without having a permanent establishment therein, shall be subject to tax as follows:

    1. If the income falls under the categories specified under Article 68 of the Law, such income shall be subject to withholding tax as per the provisions of that Article.

    2. If the income represents capital gains resulting from the disposal of fixed or tradeable assets, or from disposal of shares in a resident company, such income shall be subject to tax under the general provisions of the Income Tax Law.

  3. [The provisions of the Income Tax Law shall apply to any natural or legal person, Saudi or non-Saudi, engaged in the investment and transportation of natural gas.][2]

Footnotes

[1]Amended by MR No. 1727 dated 25/05/1439H (11/2/2018). Prior to the amendment, Para 1 read as follows:

"The provisions of the Law also apply to non-resident persons, natural or corporate, Saudi or non-Saudi, who conduct business in the Kingdom through a permanent establishment located in the Kingdom or who derive income from a source in the Kingdom."

Also amended by MR No. 5122 dated 24/12/1441H (14/8/2020), which deleted the following from 1(a) for fiscal years beginning on or after 1/1/2020:

'Indirect ownership refers to ownership through another entity up to the second level.'

Also amended by MR No. 2083 dated 1/06/1438 (28/02/2017), which inserted the following into 1(b):

'This excludes shares owned directly or indirectly by persons engaged in the production of oil and hydrocarbon materials in capital companies listed on the Saudi stock exchange, and the shares of these companies owned directly or indirectly in capital companies.'

[2]Inserted by MR No. 2568 dated 5/9/1440H (10/05/2019) with effect 1/01/2018.

Fast-loading version for search engines - Click here for the interactive version