Question

Q1. A resident capital company has both Saudi and non-Saudi shareholders and its capital is divided between them equally. Net income for 2019 was 3,000,000 SR and was adjusted according to the tax rules applicable in the kingdom is 3,200,000 SR. (2 Marks)

Required:

1. Compute the tax amount to be paid by the company.

2. Compute the tax amount to be paid by non-Saudi shareholders assuming that dividends paid in cash of 1,000,000 SR.

Q2. Answer the following questions. (3 Marks)

1. A taxpayer realized capital gains of 50,000 SR from selling his shares in Saudi capital market. How does these gains are treated under the Saudi Law?

2. A taxpayer incurred expenses of 50,000 SR to improve a depreciable asset at a book value of 500,000 SR. What is the amount of expenses deductible by the tax law?

3. Resident Capital Company works in sales business has the following selected financial information:

Account

Amount

Allowance for doubtful account

80,000 SR

Reserve for obsolete inventory

50,000 SR

Bad debt (written off)

6,500 SR

Donations to the Help the Poor Organization (non-licensed in Saudi)

11,350 SR

Old employees’ reunion party expenses

15,000 SR

Loss on disposal a delivery truck

8,000 SR

How much of these accounts are deductible under Saudi Low? Explain your answer.

Late submission will NOT be accepted. . Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). Submissions without this cover page will NOT be accepted. Assignment Question(s): (5 Marks) Q1. A resident capital company has both Saudi and non-Saudi shareholders and its capital is divided between them equally. Net income for 2019 was 3,000,000 SR and was adjusted according to the tax rules applicable in the kingdom is 3,200,000 SR. (2 Marks) Required: Compute the tax amount to be paid by the company. Compute the tax amount to be paid by non-Saudi shareholders assuming that dividends paid in cash of 1,000,000 SR. Q2. Answer the following questions. (3 Marks) 1. A taxpayer realized capital gains of 50.000 SR from selling his shares in Saudi capital market. How does these gains are treated under the Saudi Law? 2. A taxpayer incurred expenses of 50,000 SR to improve a depreciable asset at a book value of 500,000 SR. What is the amount of expenses deductible by the tax law? 3. Resident Capital Company works in sales business has the following selected financial information: Account Allowance for doubtful account 80,000 SR Reserve for obsolete inventory 50,000 SR Bad debt (written oft) 6,500 SR Donations to the Help the Poor Organization (non-licensed in Sauda) 11.150 SR Old employees reunion party experts 15.000 SR Loss on disposal a delivery truck 8,000 SR How much of these accounts are deductible under Saudi Low? Explain your answer.

Answer 1

Taxation as per Saudi Arabia Law
1	Tax amount to be paid by the company on income is @20% of share of income by non saudi share holders
	i.e. (50% of 3200000) * 20%
	Since there are 50% non saudi holders and adjusted total income is Rs.3200000
	Tax amount		320000
2	5% witholding tax is paid by non saudi holders unless there is different treaty with other country
	5%*1000000	=	50000
3	Tax on capital gain on sale of shares by non saudi share holders
	20% tax is imposed on capital gain arised from sale of shares by non saudi share holders
	i.e
	20%*50000	=	10000
4	Amount of expenses incured to improve the fixed assets is of capital nature and will not be allowed as expense.
	It has to be added to value of fixed assets and depreciated year on year
5	Allowable expenses or not
	Allowance for Doubtful account			80000	Not allowable as it is not expenses it is just estimate
	Reserve for obsolete inventory			50000	Not allowable as it is not expenses it is just estimate
	Bad debt written off			6500	Allowable if the same was shown as income in previous years with cpa certificate
	Donations to help poor organisation (non licesenced)			11350	Not allowable as not licensed in saudi
	Old employee reunion party			15000	Not allowable as personal in nature
	Loss on disposal of delivery truck			8000	allowable