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Tax on Foreign Firms
Slashed
JEDDAH, 29 April 2003 — Saudi businessmen have welcomed yesterday’s Shoura
Council decision to cut taxes on profits of foreign companies from 45 percent to
a maximum of 25 percent, saying the move will boost foreign investment in the
Kingdom.
“The Shoura approved the 69-article law and will forward it to the Council of
Ministers” for endorsement, Hamoud Al-Badr, secretary-general of the Council
told reporters.
The 120-member Council in January rejected an article in the legislation
suggesting an income tax levy of around 10 percent on the salaries of some seven
million expatriate workers earning more than SR3,000 ($800) a month.
But the law, which becomes effective after approval from the Cabinet, also
stipulates a maximum of 85 percent tax on gas and hydrocarbon projects, a field
almost totally off-limit to foreign investors.
The Kingdom has been negotiating with eight oil giants the implementation of
three major gas projects requiring initial investments of some $25 billion.
Talks have reached final stages on two projects while the third has been
temporarily shelved for further economic assessment.
The new legislation offers certain tax exemptions, especially for spending on
research, development and geological surveys, and allows losses to be carried
over from one year to the next.
In joint ventures with Saudi partners, taxes are imposed on the foreigners’
share. Saudi and Gulf Arab businesses already pay zakat, which works out to 2.5
percent of a firm’s annual net worth.
International airlines operating in the Kingdom will pay an annual tax of five
percent on sales of tickets, freight and mail.
Saudi Arabia is projecting a $10.4-billion budget deficit for fiscal 2003, but
economists predict the deficit will be wiped out due to high oil prices. The
Saudi Arabian General Investment Authority has licensed 1,782 industrial,
agricultural and service projects worth SR51 billion ($13.6 billion) since its
inception in 2000.
Copyright © 2003
Arabnews.com compiled by Saudia-Online staff
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