GTL Summary:

This Resolution constitutes the Executive Bylaws for the Kingdom of Saudi Arabia's Income Tax Law, providing detailed implementation rules. It specifies the mandatory accounting treatment for various transactions. As per Article 20, taxpayers using the accrual basis must account for long-term contracts using the percentage of completion method, based on a prescribed formula. The Bylaws define a long-term contract as one for manufacture, installation, or construction not completed within the same tax year and lasting over six months. The Tax Authority is empowered to determine income if a taxpayer fails to comply with this method.

Document Type: ERS - Executive Regulations
Law: Income Tax Law (Royal Decree No M/1 - 21 Feb 2004)
Decision Number: executive-regulations-1535-article-20
Year: 2019
Country: 🇸🇦 KSA
Official Name: Article 20 - Long-Term Contracts
Last updated at: 2026-01-05 08:39:39 UTC

Article 20 - Long-Term Contracts

  1. Accounting for long-term contracts by a taxpayer using the accrual basis (whether the revenue is earned by the contractor or paid to the contract owner or the main contractor) should be done based on the percentage of work completed during the tax year, according to the following formula:

    Costs incurred during the taxable year X Total value of contractTotal estimated costs of the long term contract

  2. The term "long-term contract" means a contract for manufacture, installation, construction, turn-key contract, or performance of related services (such as project management contract with the supervising engineer), that has commenced during the tax year but is not completed within the same year, other than a contract estimated to be completed within 6 months of the actual start date.

  3. If a taxpayer fails to comply with the prescribed method in paragraph (1) of this Article to account for income from long-term contracts, the Authority has the right to determine such income as it deems appropriate based on available information and evidence.

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