Article 2: Persons Subject to Taxation

(a)   A resident capital company with respect to shares of non-Saudi partners.

(b)   A resident non-Saudi natural person who conducts business in the Kingdom.

(c)    A nonresident who conducts business in the Kingdom through a permanent establishment.

(d)   A nonresident with other taxable income from sources within the Kingdom.

(e)    A person engaged in the field of natural gas investment.

(f)     A person engaged in the field of oil and hydrocarbons production.

Article 3: Concept of Residency

(a)   A natural person is considered a resident in the Kingdom for a taxable year if he meets any of the two following conditions:

(1)    He has a permanent place of residence in the Kingdom and resides in the Kingdom for a total period of not less than thirty (30) days in the taxable year.

(2)    He resides in the Kingdom for a period of not less than one hundred eighty three (183) days in the taxable year.

      For purposes of this paragraph, residence in the Kingdom for part of a day is considered residence for the whole day, except in case of a person in transit between two points outside the Kingdom.

(b)   A company is considered resident in the Kingdom during the taxable year if it meets any of the following conditions:

(1)   It is formed in accordance with the Companies Law.

(2)   Its central management is located in the Kingdom.

Article 4: Permanent Establishment

(a)    A permanent establishment of a nonresident in the Kingdom, unless otherwise stated in this Article, consists of the permanent place of the nonresident’s activity through which it carries out business, in full or in part, including business carried out through its agent.

(b)    The following are considered a permanent establishment:

(1)   Construction sites, assembly facilities, and the exercise of supervisory activities connected therewith.

(2)   Installations, sites used for surveying natural resources, drilling equipment, ships used for surveying for natural resources as well as the exercise of supervisory activities connected therewith.

(3)   A fixed base where a nonresident natural person carries out business.

(4)   A branch of a nonresident company licensed to carry out business in the Kingdom.

(c)     A place is not considered a permanent establishment of a nonresident in the Kingdom if used in the Kingdom only for the following purposes:

(1)   Storing, displaying or delivering goods or products belonging to the nonresident.

(2)   Keeping a stock of goods or products belonging to the nonresident for the purpose of processing by another person.

(3)   Purchasing goods or products for the sole purpose of collection of information for the nonresident.

(4)   Carrying out other activities of preparatory or auxiliary nature for the interests of the nonresident.

(5)   Drafting contracts for signature in connection with loans, delivery of goods or activities of technical services.

(6)   Performing any series of activities stated in subparagraphs (1) to (5) of this paragraph.

(d)    A nonresident partner in a resident partnership is considered an owner of a permanent establishment in the Kingdom, in the form of an interest in a partnership.

Article 5: Source of Income

(a)    Income is considered accrued in the Kingdom in any of the following cases:

(1)         If it is derived from an activity which occurs in the Kingdom.

(2)         If it is derived from immovable property located in the Kingdom, including gains from the disposal of a share in such immovable properties and from the disposal of shares, stocks or partnership in a company the property of which consists mainly, directly or indirectly of shares in immovable properties in the Kingdom.

(3)         If it is derived from the disposal of shares or a partnership in a resident company.

(4)         If it is derived from lease of movable properties used in the Kingdom.

(5)         If it is derived from the sale or license for use of industrial or intellectual properties used in the Kingdom.

(6)         Dividends, management or directors' fees paid by a resident company.

(7)         Amounts paid against services rendered by a resident company to the company’s head office or to an affiliated company.

(8)         Amounts paid by a resident against services performed in whole or in part in the Kingdom.

(9)         Amounts for exploitation of a natural resource in the Kingdom.

(10)     If the income is attributable to a permanent establishment of a nonresident located in the Kingdom, including income from sales in the Kingdom of goods of the same or similar kind as those sold through such a permanent establishment, and income from rendering services or carrying out another activity in the Kingdom of the same or similar nature as an activity performed by a non-resident through a permanent establishment.

(b)    Place of payment of the income shall not be taken into account in determining its source.

(c)     For purposes of this Article, a payment made by a permanent establishment of a nonresident in the Kingdom is considered as if paid by a resident company.