For companies listed on the Saudi Stock Exchange (Tadawul), the standard CIT exception for non-Saudi shareholders takes a specific form. Under Article 3(6) of the Zakat Implementing Regulations, shares held by non-Saudi shareholders in Tadawul-listed companies are subject to Zakat — not CIT — with one specific exception: shares held by non-Saudi founders as defined in the company’s articles of association or other statutory documents.

Reading this alongside Article 1(a) of the Income Tax Implementing Regulations, the picture becomes clear. The standard rule is that non-Saudi shares in resident capital companies are subject to CIT. The exception to that exception — carved out from CIT scope — is shares in Tadawul-listed companies owned with the intention of speculative trading. Those shares are instead swept into Zakat scope.

The practical mechanism is that Zakat on publicly-traded Saudi shares is managed through the exchange infrastructure. Non-Saudi investors trading Tadawul shares are subject to Zakat on those holdings, administered through ZATCA’s coordination with the Capital Market Authority and the exchange’s settlement systems, rather than through individual CIT filings by each foreign investor.

The carve-out for non-Saudi founders is an important qualification. Where a non-Saudi investor holds shares as a founder — meaning they were an original promoter of the company pre-IPO, and their founder status is explicitly recognised in the company’s articles of association or other statutory founding documents — those shares are not swept into the Zakat framework by Article 3(6). The founder’s shares remain subject to the standard CIT framework.

This distinction reflects the different economic character of the two types of non-Saudi holdings. A speculative market trader has no strategic relationship with the company and holds shares purely as a financial instrument — a context analogous to the Islamic charitable purpose of Zakat. A strategic founding investor has a committed, long-term relationship with the company and their economic interest is more naturally characterised as a capital investment subject to CIT on income and gains.

The practical implication for listed companies with non-Saudi founders: those founders must still comply with the CIT framework for their shareholding — dividend income treatment, capital gains on disposal of their founders’ shares, and CIT filing obligations all apply under the standard Income Tax framework, not under Zakat.

For a Tadawul-listed company with both Saudi shareholders and non-Saudi market investors (non-founders), the Zakat obligation effectively covers the full shareholder base — both Saudi shareholders (subject to Zakat in the normal way) and non-Saudi speculative holders (who are swept into Zakat rather than CIT). The listed company files its Zakat return reflecting this combined position.

The Zakat base computation follows the standard Zakat IR methodology — equity-based, with prescribed additions and deductions. The non-Saudi founders’ CIT obligation is a separate matter handled through the standard CIT framework. ZATCA administers both, with CMA coordination for the market-trading Zakat mechanism.

For the listed company’s finance function, this structure means: one Zakat return covering the Zakat obligations of all Saudi and non-Saudi (non-founder) shareholders; and a separate CIT framework obligation for non-Saudi founders’ income from the company. The company is not responsible for filing CIT returns on behalf of its non-Saudi founder shareholders as individuals — those founders have their own separate CIT obligations.

Foreign institutional investors — asset managers, pension funds, sovereign wealth funds — investing in Tadawul-listed Saudi companies as speculative market participants are, under the Saudi framework, subject to Zakat on their holdings rather than to CIT as would be the case in most other jurisdictions. This represents a structural difference from standard international tax treatment and can affect foreign investors’ home-country tax calculations, particularly for those relying on foreign tax credits for Saudi taxes paid.

Whether a foreign investor’s home country tax authority recognises Saudi Zakat as a creditable foreign tax depends on that home country’s domestic rules — specifically whether they treat Zakat as a tax “on income” within the meaning of their foreign tax credit provisions. This varies by jurisdiction and is an area where institutional investors should obtain specific home-country tax advice.

Does a foreign investor who buys Aramco shares pay Zakat or CIT?

Saudi Aramco is engaged in oil and hydrocarbon production. Under Article 6(2) of the Zakat IR, resident capital companies whose shares are owned directly or indirectly by persons engaged in oil and hydrocarbon production are specifically excluded from the Zakat framework — subject instead to the Income Tax provisions applicable to hydrocarbon activities. Foreign investors in Aramco are subject to the hydrocarbon CIT framework, not to standard Zakat. This is an exception to the general listed-company Zakat rule.

If a non-Saudi founder sells shares on Tadawul, is the capital gain taxable?

Under the Income Tax IR, capital gains from disposal of securities traded on the Saudi Stock Exchange are exempt from CIT under Article 7(1), subject to the condition that the investments were not existing before the law’s effective date. A non-Saudi founder selling founders’ shares through Tadawul would need to confirm whether their specific holding falls within this exemption or whether the pre-law holding condition affects the analysis. Specialist advice should be sought for significant disposals of founders’ shares.

Does Zakat on listed company shares affect the company’s dividend distributions?

Zakat is a company-level obligation calculated on the Zakat base. Whether dividends are distributed or retained does not directly determine the Zakat obligation (though under Article 37 of the Zakat IR, distributed profits declared but not paid to shareholders are added to the Zakat base, while profits actually distributed are not added). The dividend policy affects the equity figure — and therefore the Zakat base — but the relationship is through the balance sheet, not a direct percentage-of-dividend rule.