Saudi Tax Glossary

A

Adjusted Zakat Base 2.5%

The taxable base used to calculate Zakat liability, derived from a Saudi or GCC-national entity’s balance sheet. It includes equity, long-term borrowings, and certain provisions, reduced by qualifying deductions such as fixed assets used in business and long-term investments.
Arm’s Length Principle TP Bylaws

The standard applied in Saudi Transfer Pricing rules. Related-party transactions must be priced as if conducted between independent parties under comparable circumstances. ZATCA benchmarks controlled transactions against this standard during TP audits.
Assessment (Tax Assessment)

A formal determination by ZATCA of the tax liability owed by a taxpayer, issued following an audit, review, or failure to file. Assessments are subject to objection and appeal within specified statutory deadlines.
APA (Advance Pricing Agreement) Article 23 TP Bylaws

An agreement between a taxpayer and ZATCA pre-confirming the acceptable transfer pricing methodology for specified future controlled transactions. Available for transactions with annual value of at least SAR 100 million. Must be initiated at least 12 months before the first fiscal year to be covered.

B

Benchmark Study TP

An economic analysis used in transfer pricing to identify comparable third-party transactions or companies, used to demonstrate that a related-party transaction meets the arm’s length standard. Typically conducted using commercial databases such as Bureau van Dijk.
Beneficial Owner

The natural person who ultimately owns or controls a business or transaction. Relevant in WHT analysis, treaty benefit claims, and beneficial ownership disclosure requirements under Saudi anti-avoidance rules.

C

CbCR — Country-by-Country Report SAR 3.2B threshold

A mandatory reporting requirement for multinational enterprise groups with consolidated revenue above SAR 3.2 billion. CbCRs disclose revenue, profit, tax paid, employees, and assets by jurisdiction, and are filed with ZATCA and exchanged with foreign tax authorities.
CIT — Corporate Income Tax 20%

Tax imposed at 20% on the taxable income of non-Saudi, non-GCC investors in Saudi Arabia. Saudi and GCC-national shareholders are subject to Zakat, not CIT. Mixed-ownership companies are assessed on a proportional basis reflecting each ownership tier.
Clearance — E-Invoicing Phase 2

The e-invoicing model under ZATCA Phase 2 requiring large taxpayers to submit invoices to ZATCA’s FATOORAH platform for real-time cryptographic stamping before the invoice is issued to the customer. Contrasted with the Reporting model for smaller taxpayers.
Controlled Transaction

Any transaction between related parties subject to transfer pricing rules. Includes intercompany sales, loans, royalties, management fees, service charges, guarantees, and cost-sharing arrangements. All controlled transactions must comply with the arm’s length principle.

D

Deemed Supply (VAT)

A transaction treated as a taxable supply for VAT purposes even without a sale. Examples include private use of business assets, gifts exceeding SAR 200 in value, and certain supplies on business closure or deregistration.
Deductible Expense

An expense subtracted from gross income or the Zakat base when computing taxable income or Zakat liability. ZATCA requires that expenses be incurred wholly and exclusively for business purposes to qualify.

E

E-Invoicing — FATOORAH Phase 1 & 2

Saudi Arabia’s mandatory electronic invoicing system introduced by ZATCA. Phase 1 (December 2021) required all VAT-registered businesses to generate and store invoices electronically. Phase 2 (rolling out by taxpayer wave from January 2023) requires integration with ZATCA’s platform for clearance or reporting.
Excise Tax 50–100%

A selective tax imposed on specific goods considered harmful to health or the environment. Rates: tobacco products 100%, energy drinks 100%, carbonated drinks 50%, sweetened beverages 50%. Applies at the manufacturing, import, or production stage.
Exempt Supply (VAT)

A supply that falls outside the scope of VAT and does not attract the 15% rate. Unlike zero-rated supplies, exempt supplies do not entitle the supplier to recover related input VAT. Key exempt supplies include certain financial services and residential property leases.

F

FATOORAH

ZATCA’s e-invoicing platform through which Phase 2 taxpayers clear or report their electronic invoices. The name derives from the Arabic word for invoice (فاتورة). Phase 2 requires ZATCA-compliant XML format and either real-time clearance or 24-hour reporting, depending on taxpayer category.
Filing Deadline

The statutory date by which a tax return or payment must be submitted to ZATCA. Key deadlines: VAT returns due on the last day of the month following each tax period; Zakat/CIT annual returns due within 120 days of fiscal year end; WHT due within the first 10 days of the following month.

G

GCC National

A citizen of a Gulf Cooperation Council member state (Saudi Arabia, UAE, Kuwait, Bahrain, Qatar, Oman). GCC nationals are treated equivalently to Saudi nationals for Zakat purposes and are not subject to CIT on their share of profits in Saudi entities.
Group Registration (VAT)

A facility allowing two or more related VAT-eligible entities under common control to register as a single VAT group. Supplies between group members are disregarded for VAT purposes. A representative member files consolidated returns on behalf of the group.

H

Hijri Calendar

Saudi Arabia’s official Islamic lunar calendar. Most ZATCA filings now use the Gregorian calendar, but the Hijri calendar remains relevant in interpreting older ZATCA rulings and in certain Zakat filing contexts. The two calendars are approximately 11 days apart per year.

I

Input Tax (VAT)

VAT paid or payable by a VAT-registered business on goods and services acquired for business purposes. Input tax is recoverable (offset against output tax) where acquisitions relate to taxable supplies. Input tax on exempt activities or personal use is not recoverable.
Intercompany Transaction

A transaction between two entities within the same corporate group. Subject to Saudi transfer pricing rules when involving related parties as defined under the TP Bylaws. All intercompany transactions must be conducted at arm’s length and documented accordingly.

J

Joint Liability

The principle under which ZATCA may hold multiple parties responsible for a tax obligation. Relevant in VAT group registrations (where the representative member and constituent members share liability) and in certain related-party transactions involving tax avoidance.

L

Local File TP — SAR 6M threshold

A transfer pricing documentation requirement for Saudi taxpayers with related-party transactions above SAR 6 million annually. The local file details the taxpayer’s business, controlled transactions, and the economic analysis supporting arm’s length pricing. Must be available within 30 days of a ZATCA request.

M

Management Fee WHT 20%

A charge made by a parent or group entity to a subsidiary for centrally provided management, administrative, or support services. One of the most scrutinised intercompany charges in Saudi TP audits. Must be supported by evidence of services actually rendered and an arm’s length fee level.
Master File TP — SAR 6M threshold

A group-level transfer pricing document providing an overview of the multinational group’s global business, supply chain, intangibles, and financial arrangements. Required alongside the Local File for Saudi taxpayers meeting the SAR 6 million controlled-transaction threshold.

N

Non-Resident

An entity or individual without a taxable presence (permanent establishment) in Saudi Arabia. Payments made by Saudi-resident entities to non-residents are typically subject to Withholding Tax at source, with the Saudi payer responsible for deduction and remittance.
Nisab

The minimum threshold of wealth above which Zakat becomes obligatory under Islamic law. In a corporate context, Zakat applies to entities meeting relevant ownership and eligibility criteria, with the adjusted Zakat base as the taxable measure rather than a nisab amount.

O

Output Tax (VAT)

VAT charged by a VAT-registered business on its taxable supplies. The difference between output tax collected and input tax paid determines the net VAT payable to (or reclaimable from) ZATCA for each tax period.

P

Permanent Establishment (PE)

A fixed place of business through which a non-resident entity carries on business in Saudi Arabia, creating a taxable presence subject to CIT. Examples include a branch, office, factory, construction project exceeding 6 months, or a dependent agent. Existence of a PE triggers CIT filing obligations.
Place of Supply (VAT)

The rule that determines where a supply is treated as taking place for VAT purposes, which determines whether Saudi VAT applies. Saudi VAT follows a destination-based approach for cross-border supplies, subject to specific rules for services, real estate, and goods.

R

Related Party TP Bylaws

As defined under Saudi TP Bylaws: entities under common control (50%+ direct or indirect ownership), individuals and close relatives, and entities where one party has significant influence over the other. Related-party transactions trigger TP documentation and disclosure requirements.
Reporting Model (E-Invoicing)

The FATOORAH e-invoicing model applicable to smaller taxpayers, under which invoices are submitted to ZATCA’s system within 24 hours of issuance (rather than before issuance as in the Clearance model). Applicable to simplified tax invoices in B2C transactions.
RETT — Real Estate Transaction Tax 5%

A 5% tax imposed on the transfer of real estate in Saudi Arabia, charged on the gross consideration. RETT replaced VAT on real estate transfers from 4 October 2020. Key exemptions include a first-time residential purchase exemption for Saudi nationals meeting qualifying conditions.
Royalty WHT 15%

A payment for the use of intellectual property, including patents, trademarks, software, trade names, and know-how. Royalty payments by Saudi-resident entities to non-residents are subject to WHT at 15%, absent a tax treaty providing reduced rates.

S

Simplified Tax Invoice

A VAT invoice format used for retail and lower-value B2C transactions. Requires fewer mandatory fields than a full tax invoice (no customer TIN required). Under Phase 2 e-invoicing, simplified invoices follow the Reporting model.
Standard Rate (VAT) 15%

Saudi Arabia’s standard VAT rate of 15%, applicable to all taxable supplies not specifically zero-rated or exempt. Increased from 5% to 15% on 1 July 2020 under Royal Decree M/50.

T

Tax Invoice

The mandatory VAT document issued by a VAT-registered supplier for taxable B2B supplies. Must include: seller and buyer TIN, invoice date, description, quantity, unit price, VAT amount, and total. Under Phase 2, must be generated in ZATCA-compliant XML format.
Tax Period (VAT)

The reporting period for which a VAT return is filed. Monthly filing applies to businesses with annual taxable supplies exceeding SAR 40 million. Quarterly filing applies to businesses below this threshold.
Thin Capitalisation 3:1 D/E Ratio

A rule limiting the tax deductibility of interest on related-party debt. Saudi thin capitalisation rules cap deductible related-party interest at a debt-to-equity ratio of 3:1. Excess interest is non-deductible and added back to taxable income.
TIN — Tax Identification Number

The unique identifier assigned to a taxpayer by ZATCA upon registration. Required on all VAT invoices, returns, and official correspondence with ZATCA. TINs are 15-digit numbers and are publicly verifiable on ZATCA’s portal.
Transfer Pricing (TP) TP Bylaws 2019

The rules governing how prices are set for transactions between related parties. Saudi Arabia’s TP Bylaws (2019) require that related-party transactions be conducted at arm’s length, documented in prescribed formats (Local File, Master File, CbCR), and reported in the annual TP Disclosure Form.
TP Disclosure Form 120-day deadline

An annual filing requirement for Saudi taxpayers with related-party transactions, submitted alongside the CIT/Zakat annual return within 120 days of fiscal year end. Discloses the nature, value, and pricing methodology of all controlled transactions. ZATCA uses this as an active risk-screening tool.

V

VAT — Value Added Tax 15%

A 15% consumption tax on the supply of goods and services in Saudi Arabia, introduced on 1 January 2018 at 5% and increased to 15% from 1 July 2020. Administered by ZATCA. Registered businesses collect VAT on their outputs and may recover VAT paid on their business inputs.

W

WHT — Withholding Tax 5–20%

Tax withheld at source on payments by Saudi-resident entities to non-resident recipients. The Saudi payer is responsible for deducting and remitting WHT to ZATCA. Rates vary by payment type: 5% on most services, 15% on royalties, 20% on management fees, 5% on dividends (treaty relief may apply).
White Land Tax (WLT) 2.5%

An annual tax of 2.5% on the value of undeveloped urban land held within city boundaries in Saudi Arabia, introduced to encourage development of vacant land. Applies to Saudi and non-Saudi owners of qualifying land areas above the prescribed size threshold.

Z

Zakat 2.5%

An Islamic levy of 2.5% on the adjusted Zakat base of entities owned by Saudi and GCC nationals. Administered by ZATCA. Zakat is the equivalent of corporate income tax for Saudi/GCC investors — the two are not simultaneously imposed on the same ownership share in a mixed-ownership company.
ZATCA

The Zakat, Tax and Customs Authority — the Saudi government body responsible for administering and collecting all major taxes, Zakat, and customs duties in the Kingdom. Formed in 2021 from the merger of the General Authority of Zakat and Tax (GAZT) with the General Authority of Customs.
Zero-Rated Supply (VAT) 0%

A taxable supply subject to VAT at 0%. The supplier charges no VAT but retains the right to recover input VAT related to that supply. Saudi zero-rated supplies include exports of goods, international transport services, and qualifying medicines and medical equipment.

Saudi Tax Glossary

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