We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
The Kingdom of Saudi Arabia (the "KSA") possesses one
of the largest economies in the Middle East and North Africa (MENA)
region. The KSA's economy is heavily dependent on Oil revenues.
This dependence on Oil led to pressures to diversify, liberalize
and reform the economy.
To achieve the desired liberalization and reform, policies
focused on privatization and investment promotion. Private
investment was encouraged and the KSA turned to Foreign Direct
Investment ("FDI") as an appropriate
vehicle that could revitalize its economy and diversify its
productive base.
Tax Incentives
In order to increase FDI and raise the skills of the Saudi
national work force, in 24 November 2008 Council of Ministers had
issued its decision No. 359 (the "Council of Ministers
Decision") to grant conditional 10-year tax
incentives commencing from the date on which the project enjoys the
tax credit (the "Tax Incentives") on
investment in designated underdeveloped provinces of KSA, namely:
Hai'l, Northern Borders, Jazan, Najran, Al Baha and Al
Jouf.
Foreign investors will be granted tax credit (tax deduction)
against the annual tax payable in respect of the following costs
incurred on Saudi employees for 10 years (the
"Employment Incentive"), to be
calculated as follows:
50% of the annual cost incurred on training of Saudi employees;
and
50% of the annual salaries paid to Saudi employees, if there is
any balance of tax payable after applying (1) above.
In addition, investors will be granted a tax credit for 10 years
equal to 15% of the paid up capital of industrial projects whether
in cash or in kind as well as in case of capital increase (the
"Capital Incentive").
Conditions
The Council of Ministers Decision empowers the Minister of
Finance to issue the instructions, procedures and forms (the
"Conditions") required for the
implementation of the Council of Ministers Decision.
The Minister of Finance issued his resolution No. (2106) dated
18 July 2009 with the following Conditions in relation to the Tax
Incentives:
The project should be established in any of the regions of
(Hai'l, Northern Borders, Jazan, Najran, Al Baha and Al Jouf)
including the economic cities and industrial areas established in
these regions.
The project should be licensed from the Saudi Arabian General
Investment Authority.
The project paid up capital - whether in cash or in kind
– shall not be less than SR 1 million.
The project shall maintain regular accounts audited by a
certified Saudi auditor.
If the project established in any of the above mentioned
regions is a branch of a company or a corporation established in
another region, it shall be an independent project with an
independent capital, shall maintain independent accounts to be
audited by the project auditor and submitted with an independent
tax return in addition to the consolidated return of the
activity.
The Tax Incentives shall not be extended to other dependent
projects established in regions other than those stated in the
Council of Ministers Decision.
All the projects established in the regions stated in the
Council of Ministers Decision shall benefit from the Tax Incentives
whether such projects are established before or after the issuance
of the Council of Ministers Decision.
The Tax Incentives set out in the Council of Ministers Decision
shall apply as of the year in which the project starts to benefit
from the Tax Incentives up to ten years in respect of the taxable
years commencing and ending on or after the date of issuance of the
Council of Ministers Decision.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Tax litigators will now have to consider, inter alia, the impact of certain provisions under the Tax Administration Act No. 28 of 2011 as amended by the Tax Administration Laws Amendment Act No. 21 of 2012 on the doctrine of legal professional privilege and a recent judgment reflecting the view of a court with regards to the adherence to the rules of the Tax Court by the South African Revenue Service.
Pravin Gordhan, South Africa’s Minister of Finance is expected to announce in his Budget speech later this month the substantial reform of the tax concessions currently available to individuals with respect to their pensions and savings.
In a press statement dated 4 April, 2013, the Ministry of Finance urged all taxpayers with outstanding returns and balances on any of their tax accounts to submit their returns or settle the outstanding balances.
The carbon tax to be introduced on 1 January 2015 is the biggest change to the South African tax landscape since the introduction of capital gains tax in 2001.
During 2012 the South African Revenue Service issued a draft interpretation note on the taxable benefits arising from the use of employer-provided cellular phones or computer equipment and employer-funded telecommunications services.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
