Tax Residency in Saudi Arabia
1. Criteria for Determining Tax Residency
According to Article 2 of the Saudi Arabian Income Tax Law, an individual or entity is considered a tax resident if they meet any of the following criteria:
- Individuals:
- Residing in Saudi Arabia for more than 183 days in a calendar year.
- Having a permanent home in Saudi Arabia.
- Working in Saudi Arabia for more than 183 days in a calendar year.
- Entities:
- Incorporated in Saudi Arabia.
- Having their head office or management in Saudi Arabia.
- Carrying out their main business activities in Saudi Arabia.
The rationale behind these criteria is to ensure that individuals and entities with significant ties to Saudi Arabia contribute to the country's tax revenues.
2. Impact of International Tax Treaties
Saudi Arabia has entered into several double taxation agreements (DTAs) with other countries. These DTAs may modify or provide exceptions to the standard criteria for tax residency.
For example, the DTA between Saudi Arabia and the United States provides that an individual is considered a resident of Saudi Arabia if they:
- Are present in Saudi Arabia for more than 183 days in a calendar year.
- Have a permanent home in Saudi Arabia.
- Are employed in Saudi Arabia for more than 183 days in a calendar year.
However, the DTA also includes a tie-breaker rule that states that if an individual is considered a resident of both Saudi Arabia and the United States under the domestic laws of both countries, they will be considered a resident of the country where they have their "permanent home."
These treaty-specific modifications aim to prevent double taxation and provide clarity for individuals and entities operating in multiple jurisdictions.
If delving into the depths of Saudi Arabian tax rules and regulations isn't your style, and you'd rather have experts take the reins, then Heavnn is here to help.
Let us simplify your tax planning journey. Access Heavnn's blend of professional expertise and cutting-edge technology by clicking the button below.
