THE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS
Highlighting Significant Tax Law Modifications in the Kingdom
In line with the Kingdom’s pursuit of achieving economic diversification and increasing the private sector’s contribution to the GDP, the nation has recently witnessed a series of comprehensive tax reforms, the most extensive in its modern history. These modifications align with the Kingdom’s 2030 Vision, which sets a roadmap for economic transformation by diversifying income sources and reducing dependence on oil.
Here, we wish to highlight the key features of these tax modifications based on their type:
Value-Added Tax (VAT):
A significant feature of these tax modifications is the increase in the VAT rate from 5% to 15% starting in Q3 2023. VAT is imposed on most goods and services, but essential goods such as food items will remain exempt. This decision will boost state revenues by at least 27 billion Saudi Riyals annually.
Corporate Income Tax:
The modifications include a reduction in the corporate income tax rate from 20% to 15% starting in 2024. This move aims to encourage foreign direct investments, attract global companies to transfer their activities and projects to the Kingdom, and stimulate local companies to expand and grow.
Individual Income Tax:
A new law has been introduced for individual income tax, with rates ranging from 5% to 15% based on income brackets, to be implemented in 2024. This replaces the previous withholding tax law. It’s also worth noting that individuals with limited income will be exempt from this tax to ensure social justice.
We want to add the expected impacts resulting from these tax modifications:
Together, these reforms are expected to significantly increase non-oil tax revenues, encourage investment, and support economic growth. They will also contribute to achieving the goals of the Kingdom’s 2030 Vision by diversifying national income sources and increasing the private sector’s contribution to over 65% of GDP.
In conclusion, these new tax reforms represent a qualitative leap in the path of economic transformation, a bold step towards building a thriving, sustainable economy in line with the wise leadership’s vision. These tax policies are hoped to open promising prospects for a more stable and prosperous economy in the future.