The government of Saudi Arabia issued Royal Decree No. M/131 on 20 September 2017 modifying certain articles of the Income Tax Law (ITL). The most important amendments brought by the Royal Decree are as follows:

-Shares in domestic corporations held directly or indirectly by persons in the hydrocarbon sector are now subject to income tax.

– Income tax rates for oil and hydrocarbon producing companies will be as follows:

-group members will have to file their tax returns separately and not on a consolidated basis.

– no gain or loss is computed on the transfer of assets between companies if the companies are wholly owned directly or indirectly, within the same group or the asset is owned within the group for at least two years before transfer to any parties outside the group.

– according to modified article 43 of the Income Tax Law, capital companies are now allowed to carry forward their losses regardless of the change in the ownership or control provided they continue to undertake the same activity.

– tax-exempt income now includes capital gains on the disposal of securities traded on the Saudi stock market and on one or more markets outside Saudi Arabia, dividend income (in cash or in kind) derived by a resident capital company if the ownership in the distributing company is at least 10% or more and the shares in respect of which the dividends are paid have been held for at least 1 year.

Hydrocarbon related amendments are applicable from 1 January 2017. Other amendments are effective from the beginning of the first financial year following the issuance of the Royal Decree (i.e. 1 January 2018 for most companies).