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  Formation and operation of business firms and companies is regulated by companies Law promulgated by Royal Decree No. M/6 dated 22 Rabi I 1385 H., (1965). Royal Decree No. M/5 dated 12 Safar 1387 H. (1967) and Royal Decree No. M/23 dated 28 Jumada II 1402 H. (1982) amended the regulations for companies. Under Article 1 of the Companies Law, a company has been defined as a contract pursuant to which each of two or more persons undertake to participate, in an enterprise aiming at profit, by offering in specie or as work a share, for sharing in the profits or losses resulting from such enterprise.

Following are some of its important provisions:

  • Under article 2, companies can take any of the following forms:

- General Partnerships.
- Limited partnerships.
- Joint Ventures.
- Corporations.
- Partnerships Limited by Shares.
- Limited Liability Partnerships.
- Variable Capital Companies.
- Cooperative Companies.

  • Without prejudice to the companies acknowledged by the Islamic "Shari’ah" Law, any company not having any of the legal forms as given in Article 2 of the Companies Law shall be null and void.
  • Partner's contribution may consist of a certain sum of money (a contribution in cash), or of a capital asset (a contribution in kind). It may also comprise services except in the cases where the provisions of the Companies' Regulations imply otherwise, but it may not consist (solely) of the partner's reputation or influence.
  • Every partner shall be considered indebted to the company for the contribution he has undertaken to make. If he fails to surrender it on the date set therefore, he shall be liable to the company for any damages arising from such delay.
  • Save in the case of a joint venture, a company's memorandum of association and any amendment thereto must be recorded in writing in the presence of a registrar. Otherwise, such memorandum or amendment shall not be valid vis-à-vis third parties.
  • With the exception of joint ventures, any company incorporated in accordance with these Regulations shall establish its head office in the Kingdom. It shall be deemed to have Saudi nationality, but this shall not necessarily entail its enjoyment of such rights as may be restricted to Saudis.

For details pertaining to formation and operation of companies, please contact Companies Department, Ministry of Commerce (see here for address).


The Kingdom of Saudi Arabia has a very liberal tax system; there are few taxes payable by an individual or a company and they are also at very low rates.

1. Zakat

    The Zakat (a form of tithe) is paid annually by Saudi individuals and companies within the provisions of Islamic law as laid down by Royal Decree No. 17/2/28/8634 dated 29/6/1370 H. (1950). The Zakat is an annual flat rate of 2.5 percent of the assessable amount.

2. Personal Income Tax

    For individual employees, both national and expatriate, there is no income tax in the Kingdom.

    Self-employed expatriates such as doctors, accountants, lawyers, etc. pay taxes on their net annual income at the following rates:

Net Income (per year) Tax Rate (percent)
First 6,000 Exempted
From SR 6,001 - 10,000 5
From SR 10,001 - 20,000 10
From SR 20,001 - 30,000 20
Over SR 30,000 30

A slab system is followed to calculate such taxes.

3. Tax on Business Income:

A company, under the tax regulations, means a company or partnership having material gain as the basic objective. The taxable incomes of companies include:

* profits of a foreign company;
* shares of non-Saudi sleeping partners in the net profits of partnership companies.

All legitimate business expenses and costs, including business losses and depreciation, are deductible in computing net profits. Any reasonable method of depreciation may be adopted by the company but the same must be adhered to from year to year. Capital gains are included in the profits of the company. The following tax rates, on a slab basis, are now in force:

Net Profit Level    Tax Rate (percent)
First SR 100,000 25
From SR 100,001-500,000 35
From SR 500,001-1,000,000 40
Over SR 1,000,000 45

    Income tax is charged at different rates for companies engaged in the production of petroleum and hydrocarbons in the Kingdom.

    Every company is required to submit a financial statement on an official form and to pay the tax not later than the 15th day of the third month of the year following the Saudi Arabian fiscal year, which commences on the 10th of Capricorn (December 31).

    Companies formed under the provisions of the Foreign Capital Investments Regulations with participation of Saudi capital of not less than 25 percent are exempt for up to ten years from payment of income tax.

For further details, please contact the Ministry of Finance and National Economy, Directorate of Zakat and Income, Companies Department, (see here for address). Note the New  Amendments according to the new Foreign investment Law below:

  1. For purpose of the State bearing 15% of taxes imposed on companies' profits that exceed one hundred thousand Riyals. this percentage shall be calculated out of the tax brackets values provided for in Article (11) dated 21/1/1370(H). This shall include all capital companies subject to tax with the exception of companies operating in the field of oil, gas and hydrocarbon production.

  2. The State's bearing this tax percentage is limited only to profits which exceed one hundred thousand Riyals per year. Accordingly, this shall be carried out when collecting taxes from the capital companies as follows:

          1. First bracket: 1 - 100,1000 SR.            value 25%

          2. Second Bracket: 100,001 - 500,000      value 20% in lieu of 35%

          3. Third bracket: 500,001 - million Riyals  value 25% in lieu of 40%

          4. Fourth bracket: Over million Riyals        value 30% in lieu of 45%


  1. Net losses which may be carried forward shall be determined by the legally amended operational losses without regard to book losses. Operational losses shall mean expenses which are legally deductible in accordance to Article 14 of the Tax Law and which are in excess of the income subject to tax during the taxable year.

  2. All subject who keep regular account and who are subject to Income Tax pursuant to the aforementioned Royal Decree shall benefit from the principle of reallocating losses.

  3. Subjects exempted from tax shall not benefit from the principle of subsequent to the issuance of the aforementioned Resolution of the Council of Ministers and shall not include the accounts of previous fiscal years whether such accounts were submitted to the department or not, or by tax Dispute Committee or Appellate Committees.

  4. This Resolution is applicable on fiscal years which end at dates that are subsequent to the issuance of the aforementioned Resolution of the Council of Ministers and shall not include the accounts of previous fiscal whether such accounts were submitted to the department or not, or by Tax Dispute Committees or Appellate Committees.


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              


New Income Tax Act for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals

-In its weekly session held on 20/11/1424 (12/1/2004), The Cabinet endorsed a new income tax law for non-Saudi and Gulf Cooperation Council (GCC) companies and individuals doing business in the Kingdom. |more|




The Trade Marks Regulations were originally issued by Royal Decree No. 8762 dated

28-7-1358 H. (1938). It contained 43 Articles. However, Articles 41, 42 and 43 were subsequently repealed by Royal Decree No. 8/M of 20 Rabi II, 1393 H. (1973). Thereafter these were reviewed and promulgated by Royal Decree No. M/5 dated 4-5-1404 H. (Jan. 7, 1984). Rules for Implementation of the Trade Marks Regulations were issued by the Minister of Commerce Resolution No. 94 dated 5.8.1404 H. (May 6, 1984).

Provisions of the new Regulations included: definitions of trade marks, registration, announcement, renewal and deletion thereof in addition to the transfer of ownership of marks, mortgage, seizure, and licensing thereof together with definition of fees due on registration, etc. They define crimes and penalties regarding trade marks to protect public and private rights and formulation of procedural rules to decide on their crimes and impose penalties thereon.

The fees due under the provisions of these Regulations were defined by Article 47 in the following manner:

a) SR 1,000 (one thousand) on any part of the following:

1. Application to register a trade mark for one category.
2. Application to register a collective trade mark for one category.
3. Request to examine a trade mark for one category.
4. Viewing the Register for one trade mark in respect of one category.
5. Every photocopy taken from the records of the Register in respect of one trade mark for one category.
6. Application to enter transfer or assignment of ownership for one trade mark in respect of one category.
7. Application to license the use of a mark for one category as well as entering its mortgage in accordance with article 36 and 40 of these regulations.
8. Each amendment or addition to a mark for one category as well as entering its mortgage in accordance with Article 22 of the Regulations.
9. Application to add or to alter any statement for which no fee is specified in respect of a mark for one category.


b) SR 3,000 (three thousand) on any part of the following:

b) SR 3,000 (three thousand) on any part of the following:

1. Application for temporary protection for a trade mark of one category.
2. Registration of trade mark.
3. Renewal of registration of one trade mark for one category.
4. Renewal of registration of a collective trade mark for one category.

These fees may be amended by a resolution of the Council of Ministers.

For further details, please contact the Department of Internal Trade, Ministry of Commerce (see here for address).


   The Patents Law was promulgated by Royal Decree No. M/38 dated 10/6/1409 (January 17, 1989).  The Law contains 62 articles with the main objective of providing adequate protection of inventions inside the Kingdom of Saudi Arabia.

     Applications for patents shall be submitted to the Directorate of Patents at King Abdul Aziz City for Science and Technology on the form designed for such purpose (see here for address).  The patent's term shall be fifteen years from date of grant and it may be extended for five more years.

    Patents' disputes shall be resolved by an ad hoc Committee at the King Abdul Aziz City for Science and Technology. Appeal against the Committee decision may be made to the Board of Grievances within sixty days from the date of notification. 

Patents fees as referred to in Article 59 of this law are as follows:

Type of Fee Individuals  Companies
Patent Application SR 400  SR 800
Issuance/Publication of Patent SR 500  SR 1,000
Annual Fees per Patent  SR 400 SR 800
Amendment or Addition SR 100 SR 200
Change of Ownership SR 200 SR 400
Obtain Patent Copy/Other documents SR 50  SR 100
Grant of Forcible Licensing SR4,000 SR 8,000
Registration of Licensing Contracts SR 400 SR 800
Application for Patent Extension  SR 400 SR 200 

For further information, please contact the Patents Department, King Abdul Aziz City for Science and Technology (see here for address).


The Copyright Protection Law, approved by the Council of Ministers Resolution No. 30 dated 2512/1410H., corresponding to September 25, 1989 was enacted by Royal Decree No. M/11 dated 19/5/1410H, corresponding to December 17, 1989, to take effect on 15/6/1410, corresponding to January 12, 1990.

The Law's objective is to afford protection to authors of classified creative works in science, literature, and arts without regard to the type of classified work, its mode of expression, its significance or the purpose of composition. It contains definition of the following: classified work, author, publishing, creation, copying and national folklore and falls into the following seven chapters:

Chapter One:      Copyright of Classified Works, Articles 2 through 6.
Chapter Two:     Copyrights of Authors, Articles 7 through 15.
Chapter Three:    Transfer of Copyrights, Articles 16 through 22.
Chapter Four:     Scope and Duration of Copyrights, Articles 23 through 25.
Chapter Five:      Filing Regulations, Articles 26 and 27.
Chapter Six:        Penalties, Articles 28 through 31.
Chapter Seven:   General Provisions, Articles 32 through 34.

For further details, please contact the Ministry of Information (see here for address).

Related links:

Sources: The Commercial office, Embassy of Saudi Arabia, Washington, D.C. and compiled by Saudia-Online staff

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21 November 2004 03:00:03 PM