Saudi Corporate Tax for Foreign Companies: Income Tax, Zakat and the India Treaty

Saudi corporate tax for foreign companies is not one flat rate for every company. Which tax applies depends on who owns the shares: income tax on the share held by non-Saudi partners, and zakat on the rest, according to commercial sources (verify). This guide is for Indian founders and for finance teams in Saudi Arabia who want to understand the structure before they meet an adviser. It sets out what the Zakat, Tax and Customs Authority (ZATCA) has published, what has only been reported, and what is still unconfirmed.

Key takeaways

• ZATCA’s income tax page covers the shares that non-Saudi partners hold in resident capital companies, and non-residents with a permanent establishment or Saudi-source income. Ownership matters, not only the nationality of the company.
• The 20% income tax rate (verify) and the 2.5% zakat rate (verify) appear in many commercial sources, but we could not confirm either from a readable official text. Confirm both with ZATCA before you plan around them.
• Income tax and zakat returns are due within 120 days after the end of the year, per ZATCA. For the year ending 31 December 2025, ZATCA set 30 April 2026.
• Whether a 100% Indian-owned subsidiary pays income tax only, or zakat as well, depends on ownership and must be checked with a Saudi tax adviser.
• Treat no treaty dividend rate as settled. An Indian chartered accountant and a Saudi tax adviser must confirm it.

Reviewed by: pending (a Saudi tax adviser and an Indian chartered accountant will be named before publishing) · Last reviewed: not yet reviewed

How to read the labels in this guide

Tax content goes out of date quickly, so we label every point by how well we can support it.

• Official: we read it on a ZATCA page, and the link is in the sources.
• Reported: law firms, consultancies and accounting vendors say it, but we could not confirm it from a readable official text. These points carry “(verify)”.
• Unknown: we found nothing we could rely on. These are listed as questions for your advisers.

Some ZATCA documents, including the zakat regulation text and the India treaty, could not be read in full when we researched this guide. That is why several figures below are marked “(verify)”. The date of this research is 14 October 2026, and the guide was drafted on 19 October 2026.

Saudi corporate tax for foreign companies: ownership decides

The first question founders ask is whether they pay 20% (verify) or 2.5% (verify). The honest answer is: on which share, and owned by whom. ZATCA describes income tax by reference to the people holding the shares, not by the label on the company. A company with one owner and a company with three owners can end up in different positions even when both carry the same license. Our page on MISA licensing types explains the license options, and tax treatment sits on top of that choice rather than coming from it.

The table below is the short version. Each row names its status.

Question	What we found	Status
Who is within the scope of income tax?	Non-Saudi partners’ shares in resident capital companies; non-residents with a permanent establishment or Saudi-source income	Official (ZATCA income tax page)
What is the income tax rate?	20% of net adjusted profit (verify)	Reported
What is the zakat rate?	2.5% of the zakat base (verify)	Reported
When are returns due?	Within 120 days after year end	Official (ZATCA notice, 23 April 2026)
What does the India-Saudi treaty say?	Not read from an official text	Unknown

Income tax on the non-Saudi share

ZATCA’s income tax page says the tax applies to resident capital companies in respect of shares held by non-Saudi partners, whether those partners are resident or non-resident, and whether they are individuals or companies. It also covers non-residents who have a permanent establishment in Saudi Arabia, and non-residents with Saudi-source income. The page also addresses non-Saudi shares held through a mixed Saudi company, so a holding structure needs an adviser’s reading and not a guess.

The rate most sources quote is a flat 20% of net adjusted profit (verify). Oil and gas activities are outside this guide.

Zakat on the Saudi share

Zakat is a different tax with a different logic. ZATCA’s Implementing Regulation for Zakat Collection was issued under Minister of Finance Decision No. 1007, dated 19/8/1445 H. It applies to financial years starting after 1 January 2024, and it replaced Decision No. 2216. That much is official.

Commercial sources add that zakat falls on the Saudi share, and on the GCC share too, at 2.5% of a base that looks more like net worth than profit (verify). Those sources do not agree on how the base is built, so this guide gives no formula. ZATCA’s income tax text mentions “non-Saudi partners” and says nothing about GCC nationals, so the GCC point stays unconfirmed (verify).

Why a single headline rate misleads

Many pages say a foreign-owned company pays 20% (verify) and a Saudi-owned company pays 2.5% (verify). In a company with mixed owners, sources describe two separate computations, one for income tax on the foreign share and one for zakat on the Saudi share, with no blending of the two (verify). A single headline rate hides that. Ask your adviser how the split works for your cap table, and do not copy a rate from a web page into a budget.

Four example ownership shapes

These examples are hypothetical and contain no numbers. They show why one answer does not fit every company. Each one is a question for your adviser, not a conclusion.

1. A 100% Indian-owned IT services subsidiary. Every share is held by non-Saudi partners. ZATCA’s scope text points to income tax on those shares. Whether zakat also applies depends on ownership and must be checked. We do not take a side.
2. A Mumbai trading company with a Saudi partner holding a minority. Sources suggest two regimes at once: income tax on the Indian share and zakat on the Saudi share (verify).
3. A Gujarat manufacturer with a Saudi investor holding part of the equity. The same mixed-ownership question arises. The split follows the shares, and each regime has its own return.
4. A Bengaluru firm opening a branch. A branch is generally treated as a permanent establishment (verify). ZATCA’s scope text puts a permanent establishment within income tax. How the branch’s costs and head-office charges are treated is a separate adviser question.

If you hold shares through an intermediate company, in India or in a third country, the picture can change again. Draw the full ownership chart before the meeting with your adviser.

Branch or subsidiary: how the tax picture differs

A subsidiary is a separate Saudi company. A branch is part of the foreign company. For tax, ZATCA’s scope text treats a permanent establishment as within income tax. Beyond that, the sources we read are thin and do not agree on detail. One says a branch is taxed like a locally incorporated entity. Another says a wholly owned branch cannot deduct certain charges paid to its head office, while a subsidiary may deduct documented fees (verify).

Tax is one input to the structure choice, not the only one. Ownership rules, liability, banking and the activity itself matter as well. Our guide to setting up a business in Saudi Arabia from India covers the wider decision. Before you choose, ask your Saudi tax adviser to model both options for your activity and your Indian parent.

Returns and deadlines

The 120-day rule

ZATCA’s notice of 23 April 2026 states the rule for both taxes. Zakat returns are due within 120 days from the end of the zakat year, under Article 102 of the Zakat Implementing Regulation. Income tax returns are due within 120 days from the end of the tax year, under Article 60 of the Income Tax Law. For the year ending 31 December 2025, ZATCA set 30 April 2026.

For a company with a 31 December year end, the same rule points to 30 April 2027 for the year ending 31 December 2026. That is our calculation, not a ZATCA date (verify). Confirm the exact deadline for your company’s year with your adviser, particularly if your first financial year is shorter or longer than 12 months.

How the return is filed

ZATCA offers a “Submit Corporate Income Tax (CIT) Return” e-service for registered income tax taxpayers. ZATCA’s page says the amount due is paid separately through SADAD. The e-service is for registered income tax taxpayers.

Advance payments, certification and penalties

Commercial sources describe advance payments, an accountant’s certification for larger returns, and late-filing penalties. They disagree on the figures and the timing, and we could not read an official text. This guide therefore gives no amounts and no thresholds. Penalties exist, so ask your Saudi tax adviser for the current rules and put the dates in your calendar from the first month.

Where VAT and bookkeeping fit

VAT is a different tax with its own registration, returns and e-invoicing rules. A VAT return does not replace an income tax or zakat return, and the reverse is also true. Apex Arabia’s complimentary VAT filing for two quarters covers VAT, not income tax or zakat. Our separate topic on bookkeeping requirements for companies in Saudi Arabia covers books, VAT returns and e-invoicing, and it also notes the 120-day annual return.

For the full picture of year one, read our business setup guide for Indian founders alongside your adviser’s filing calendar. Setup fees and government fees are on the pricing page. Tax payable on your company’s results is a separate matter and is not part of those figures.

What the India-Saudi tax treaty says, and what it does not

ZATCA and the Indian income tax department both publish the India-Saudi Arabia tax treaty. We could not read either copy when we researched this guide, so we do not state what it says. In particular, we do not state the dividend rate as fact. Third-party summaries disagree on how the treaty rate relates to Saudi Arabia’s own withholding rule, so the answer needs both advisers.

Three questions stay open, and none is a question this guide can answer.

• The Indian parent and dividends. How is a dividend from the Saudi company taxed in Saudi Arabia, and then in India? Our upcoming topic on repatriating profits to India is the right place for the detail, and your Indian chartered accountant must confirm the current Indian rule (verify).
• Zakat and the treaty. Zakat is a wealth levy, not an income tax. Whether the treaty covers it, and whether an Indian parent can claim credit for it, is not addressed in any source we read.
• Credit and paperwork. Indian rules on foreign tax credit, and the documents a payer may ask for to apply a treaty rate, such as a tax residency certificate, need an Indian chartered accountant’s confirmation (verify).

Common mistakes

• Treating the company’s nationality as the test. ZATCA’s text refers to who holds the shares. Map your owners first.
• Assuming a flat 20% (verify) for everyone. Mixed ownership can mean two regimes and two returns (verify).
• Treating a VAT return as the annual return. They are separate filings with separate dates.
• Missing a return in a quiet year. Whether a nil return is required when a company is loss-making or inactive needs your adviser’s answer. Do not assume that no return means no obligation.
• Copying a rate from the Apex Arabia website or any web page into a budget. Confirm rates with ZATCA and your adviser first.

Questions to take to your advisers

To a Saudi tax adviser:

1. Which official ZATCA text confirms the income tax rate and the zakat rate for my structure?
2. How is the zakat base defined for my company, and does a GCC shareholder’s share get zakat treatment?
3. If my subsidiary is 100% Indian-owned, do I file income tax only, or both returns?
4. What is the exact return deadline for my first financial year, and what are the advance-payment, certification and penalty rules?
5. Would a branch or a subsidiary be better for my activity, from a tax point of view?

To an Indian chartered accountant:

1. What does the notified India-Saudi treaty say about dividends, permanent establishments and relief from double tax?
2. Can my Indian company claim credit for Saudi income tax, and can it claim credit for zakat?
3. How is a dividend from the Saudi company taxed in my Indian company’s hands today?
4. Which documents do I need for treaty relief, and when?
5. Does a branch or a subsidiary change my Indian reporting?

Frequently asked questions

Do foreign companies pay zakat in Saudi Arabia?

It depends on who owns the shares. ZATCA’s income tax page covers the shares of non-Saudi partners, and commercial sources say zakat falls on the Saudi share, and on the GCC share as well (verify). Whether a 100% Indian-owned company owes zakat in addition to income tax is an open question. It depends on ownership and must be checked with a Saudi tax adviser. Do not rely on a general web answer for your structure.

What is the corporate tax rate for foreign companies in Saudi Arabia?

Commercial sources quote 20% of net adjusted profit for the non-Saudi share (verify). We could not confirm that figure from a readable official text, so treat it as unconfirmed until ZATCA or your Saudi tax adviser confirms it in writing. The rate applies to a share of the company, according to those same sources, so it is not necessarily the rate on the whole company’s profit. This guide does not cover oil and gas activities.

When is the Saudi income tax and zakat return due?

ZATCA’s notice of 23 April 2026 says returns are due within 120 days after the end of the year, under Article 60 of the Income Tax Law and Article 102 of the Zakat Implementing Regulation. For the year ending 31 December 2025, the date was 30 April 2026. For later years, the date is a calculation from your year end (verify), so confirm it with your adviser. Filing is through the ZATCA portal, and payment is made separately.

Does the India-Saudi tax treaty remove double taxation for my Indian company?

We cannot say from the sources we could read. Both tax authorities publish the treaty, but we could not read either copy, so we do not state its terms, including any dividend rate. Whether the treaty reaches zakat, and what credit an Indian parent can claim, are questions for an Indian chartered accountant and a Saudi tax adviser. Ask both advisers to read the notified text and agree on one answer.

Is a branch taxed differently from a subsidiary in Saudi Arabia?

ZATCA’s scope text treats a permanent establishment of a foreign company as within income tax, so a branch is not outside the system. Commercial sources differ on details, such as whether a branch can deduct charges paid to its head office (verify). A subsidiary is a separate Saudi company, and the tax outcome depends on who owns its shares. Ask your Saudi tax adviser to compare both for your activity before you decide.

Next step

Tell us your ownership structure, and we will help you prepare the questions for your Saudi tax adviser and Indian chartered accountant before you commit to a setup. Our pricing page shows what our service fee covers. Talk to our experts, or read why many founders choose to invest in Saudi Arabia.

This guide is for general information and is not legal advice or tax advice. Requirements vary by activity and can change; confirm current rules with ZATCA, a Saudi tax adviser and an Indian chartered accountant, or speak to our team.

Updated: 19 October 2026. Reviewed by: pending.

Sources: ZATCA, income tax; ZATCA, Zakat Collection Regulation; ZATCA, notice on submitting the CIT return for 2025; ZATCA, Submit Corporate Income Tax (CIT) Return e-service