Every country has its own taxation system and the percentage and costs associated with taxation varies accordingly. In Saudi Arabia the main types of taxes associated with real estate include the income tax and property tax. The regulatory authority in Saudi Arabia for taxation is the Department of Zakat & Income Tax. All the information regarding taxation in Saudi Arabia along with taxation laws and by-laws can be found on the official portal of this government agency.
Taxation on Individual Basis (Income Tax)
Saudi nationals are liable to pay taxes on their income and property. Zakat is levied on the income of the Saudi individual. The two types of taxable incomes for Saudi individuals include:
- Business Income
- Professional Income
A flat rate of 2.5% of the estimated 15% of the gross income is levied as Zakat on individual basis on all Saudi nationals. There are however no taxes levied on capital gains from selling of real estate property unless it is obtained from business activity. In such cases the capital gains are taxable at a flat rate of 20%.
For foreign nationals excluding GCC members (Gulf Corporation Council) who earn income in Saudi Arabia, income tax is levied at a flat rate of 20%. For people working in Natural Gas the income tax is 30% and for oil sector the tax levied is higher and approximates to about 85%.
Saudi Arabia has several tax treaties with different countries including Spain and in such cases the taxation percentage and amount differs accordingly. You can also contact Aqarat4u to get further advice on taxes in Saudi Arabia.
Taxation on Individual Basis (Property Tax)
According to the Saudi Arabia Tax Guide 2009 there are no property based taxes for Saudi nationals as well as foreigners, however Zakat may be applicable in some cases if the property/real estate is held for speculative purposes. Zakat is levied at a fixed rate of 2.5 % of the income/property value.
For Saudi Arabia based companies the taxation is based on the withholding of 2.5% as Zakat for taxation. For foreign/alien companies the tax percentage is 20% on income and capital gains.
Rent Income Taxation
There is no tax for Saudi nationals who are earning income through rent, however if a foreign/non-resident individual who are earning income through rent in Saudi Arabia there is a withholding tax of 5% on the gross rent.
In Saudi Arabia there is no tax on inheritance for both Saudi nationals and foreigners. A Saudi national can inherit property based on the Sharia law and inheritance between Non-Muslims is also free. Based on the Shari law a non-Muslim can’t inherit from a Muslim unless it is stated in a legally applicable will and is less than 30% of the real estate/property value.
Saudi Arabia is a good place to invest in real estate because of its favorable taxation policies, availability of real estate development funding by the Saudi government and no inheritance taxes. There are low taxes on capital gains and income as well which makes Saudi Arabia ideal for your real estate investment.
You can visit Aqarat4u website and know more about the important information of tax systems of real estate in the world.