Article 8: Taxable Income

Taxable Income is the gross income including all revenues, profits and gains of any type and of any form of payment resulting from carrying out an activity, including capital gains and any incidental revenues, minus exempted income.

Article 9: Gains or Losses Resulting from Disposal of Assets

(a)             The gain or loss from the disposal of an asset is the difference between the compensation received for the asset and its cost base.

(b)             No gain or loss on disposal of a depreciable asset is taken into account other than what is stated in Article Seventeen of this Law.

(c)             In determining taxable income, a natural person may not take into account gain or loss on disposal of an asset that is not for use in the activity.

(d)             The cost base of an asset purchased, produced, manufactured, or constructed by the taxpayer itself is the amount paid or incurred by the taxpayer in cash or in kind in the process of acquiring the asset.

(e)             Where a taxpayer disposes of a part of an asset, the cost base of the asset is apportioned between the part retained and the part disposed of in accordance with their market value at the time of purchase of the asset.

(f)              Expenses incurred to alter or improve a non-depreciable asset are added to the cost base of the asset.

(g)             The compensation value for disposal of an asset against assets in kind is based on the market value of those assets in kind, including exemption from debt on the asset.

(h)             Where a taxpayer disposes of an asset by way of gift or inheritance, the disposer is treated as having received compensation equal to the market value of the asset at the time of disposal, unless paragraph (i) of this Article is applicable.

(i)               If the asset disposed of is encumbered by debt exceeding its market value, the taxpayer disposing of the asset is treated as having received compensation equal to the value of such debt.

(j)               In determining the tax base, no gain or loss is taken into account on an involuntary disposal of an asset to the extent that the compensation value is used in purchasing an asset of the same kind within one year of the involuntary disposal.

(k)             The cost base of a replacement asset described in paragraph (j) of this Article is determined with reference to the cost base of the replaced asset.

(l)               Where an asset owned by a taxpayer is converted to personal use or otherwise ceases to be used in the generation of income, the taxpayer is deemed to have disposed of the asset for its market value, with the recognition of the resulting gain but not the loss.

Article 10: Tax-Exempt Income

         The following types of income are exempt from income tax:

(a)         Capital gains realized from disposal of securities traded in the stock market in the Kingdom in accordance with restrictions specified in the Regulations.

(b)         Gains resulting from disposal of property other than assets used in the activity.

Article 11: Donations

         In determining the tax base of each taxpayer, a deduction is allowed for donations paid during the taxable year to public agencies or philanthropic societies licensed in the Kingdom which are nonprofit organizations and are allowed to receive donations.