Riyadh – Custodian of Two Holy Mosques King Salman bin Abdulaziz has ordered a package of reductions on tax regime for oil and hydrocarbon producers operating in the Kingdom of Saudi Arabia.
A royal decree stipulated that the price of income tax on the tax system for those authorized to operate in oil and hydrocarbon material production in the Kingdom be as follows: 50% for an investor whose capital investments in the Kingdom of Saudi Arabia amount to more than SR375 billion, 65% for an investor whose capital investments in the Kingdom of Saudi Arabia amount to more than SR300 billion up to SR375 billion, 75% for an investor whose capital investments in the Kingdom of Saudi Arabia amount to more than SR225 billion up to SR300 billion, and 85% for an investor whose capital investments in the Kingdom of Saudi Arabia amount to more than SR225 billion.
The order described the gross capital investment as the total of the accumulating value of fixed assets from the possessions, appliances, devices, machineries etc. and non-tangible assets, including the cost of operations for examination, excavation and exploration for oil and hydrocarbon and developing them. This applies before reducing the consuming and extinguishing cost.
King Salman also ordered that as far as tax was concerned, a capital company would receive a deduction of its contribution to the pension funds as well as the social insurance funds or any other funds established for the purpose of providing the end of service rights or compensations of workers’ medical expenses, provided that the multi-faceted order is valid retro-active the first of January 2017.
Saudi Minister of Finance Mohammed bin Abdullah Al-Jadaan stated that the royal order harbors a strategic outlook to best serve the interests of the Kingdom and to bring about prosperity, for the Saudis, as it aims at securing well-established national gains for the next coming generations.
He added that any decrease in the revenues related to previously imposed taxes would be replaced by stable dividends from the state-owned companies and other fiscal inflows, paid to the government, including inflows resulting from investment profits.
Al-Jadaan emphasized the importance of the new measure, which he said would promote the Kingdom’s stature as a worldwide leading investment destination in line with Saudi Vision 2030.
The new tax rate for Saudi Aramco will amount to 50 percent, slashed from 85 percent, retroactive to Jan. 1, according to a royal order. The company also pays a 20 percent royalty on revenues.
“The new tax rate will bring Saudi Aramco in line with international benchmarks,” Saudi Aramco’s chief executive officer, Amin H. Nasser, said in a statement.