Question

A resident capital company has both Saudi and non-Saudi shareholders and its capital is divided between them equally. Net income for 2019 was 3,200,000 SR

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.

Answer 1

1.Only non-Saudi investors are liable for income tax in Saudi Arabia. In most cases, Saudi citizen investors (and citizens of the GCC countries, who are considered to be Saudi citizens for Saudi tax purposes) are liable for Zakat, an Islamic assessment. Where a company is owned by both Saudi and non-Saudi interests, the portion of taxable income attributable to the non-Saudi interest is subject to income tax, and the Saudi share goes into the basis on which Zakat is assessed. rate appilicable is 2.578%

Tax to be paid by company is = 2.578% *1600000 = 41248 SR (i.e share of saudi share holder net income) ( 50% on 3,200,000 SR)

2. A 5% withholding tax is levied on dividends paid to a nonresident, unless the rate is reduced under a tax treaty.

5% ON 1,000,000 = 50,000 SR is to be withholding by company while paying dividen to non saudi resident

the tax amount to be paid by non-Saudi shareholders assuming that dividends paid in cash of 1,000,000 SR. company already withhold the tax. so nil tax on dividen recevied