• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/5/2014

Saudi Arabia - Tax treaty update; non-resident's sale of shares 

February 5: An income tax treaty between Saudi Arabia and Tunisia has entered into force and is effective 1 January 2014. The treaty provides for the following withholding tax rates:
  • Royalty payments of 5% (instead of generally applicable rate of 15%)
  • Bank interest payments of 2.5% (instead of generally applicable rate of 5%)

In late 2013, the Saudi Arabian cabinet authorized the Ministry of Finance to sign income tax and capital tax treaties with Algeria and Kyrgyzstan. Also, the tax authorities of Barbados expressed an intention to start tax treaty negotiations with Saudi Arabia.

Determining capital gains on sales of shares by non-resident

A Saudi Arabian authority ruled in favor of a foreign shareholder in a case concerning the taxation of capital gains on the non-resident's sale of shares.

The ruling found that when a foreign shareholder sells shares in a Saudi company, the proceeds are first allocated to retained earnings, reserves, and any shareholder loan or current account balance. Then the remaining proceeds are to be compared with the share capital to arrive at the capital gain. Thus, the cost base of the disposed shares includes retained earnings, reserves, and current account.

Read a January 2014 report prepared by the KPMG member firm in Saudi Arabia: Saudi Arabia – Tax revenues, efiling of Zakat returns and more

Also included in the report are the following topics:

  • Surge in Zakat and tax revenues
  • Electronic filing of Zakat returns
  • Taxpayer wins appeal on capital gains on non-resident’s sale of shares
  • Complying with SAGIA’s new Code of Conduct
  • New SAGIA license renewal requirements

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