On 15 September 2023, several amendments to the Implementing Regulations to the Income Tax Law (the “IRTL”) and the Implementing Regulations for the Collecting of Zakat were published in the official Saudi Gazette (Umm Al Qura). The amendments came pursuant to the Minister of Finance Resolution No. (25) dated 08/01/1445H. 

Key observations

The amendments to the RITL reflect the proposed changes published in May 2023 for public consultation. The amendments are as follows:

  • Article 9 Paragraph (2) was amended to exclude loan charges used to finance capital assets booked under the cost of the asset during the period of establishment from the formula to calculate deductible expenses for loan charges under that Paragraph. 
  • Article 9 Paragraph (8)(2) was amended to explain that non-financed liabilities means the liabilities of the employer against their contribution in such funds due at the beginning of the year in which the deduction is made and which are not paid until the end of that financial year. 
  • Amendments were made to provisions pertaining to appeals. Article 60 was amended to state that “a person with respect to whom ZATCA issues a decision may appeal it in accordance with the Rules of the Committees for the Adjudication of Tax Disputes and Controversies enacted by Royal Order No 26040 and dated 21/4/1441H and all subsequent amendments thereto.”
  • Consequently, Articles 61 & 62 are repealed. 
  • Article 63 is amended as follows:
    • Paragraph (1) is amended to eliminate the higher withholding tax rate for technical & advisory services and international telecommunication services paid to a head office or related party. The withholding tax rate for these services is now 5% regardless of whether or not the recipient and the payor are related persons. 
    • Paragraph (4) is amended to clarify that taxable payments for air tickets, air or maritime freight means “any payment for international air tickets departing from the Kingdom.”

In addition, MR (25) also amended the Zakat Implementing Regulations to incorporate the Zakat, Tax and Customs Authority’s (ZATCA) new practice of issuing binding rulings under a new Article 30. The amendments introduced are similar to the recent amendments enacted to the Real Estate Transaction Tax Regulations in August 2023. The new provisions of Article 30 explains that ZATCA may issue rulings, guidelines and circulars at its discretion. It also states that rulings, guidelines and circulars are binding on ZATCA. Notably, the amendment makes clear that the binding content of rulings, guidelines and circulars would not apply retroactively but rather covers periods from the date of the issuance of such material. However, ZATCA will not be bound by rulings that are based on facts that were omitted or misrepresented by the applicant, or if the facts presented by the applicant differ from the actual transaction.  

The amendments are effective from the date of publication in Umm Al Qura (15 September 2023).

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