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19 April 2018 Saudi Arabia amends Income Tax Law on Natural Gas Investment Tax Based on Saudi Arabia's Council of Ministers' resolution No. 369 dated 27 March 2018 (10-7-1439H), Royal Decree No. M/70 dated 28 March 2018 (11-7-1439H) has been issued. The Royal Decree amends the Income Tax Laws [ITL] promulgated through Royal Decree No. (M/1) dated 30 July 2004 (15-1-1425H) regarding investments in natural gas. 1. Cancellation of ITL Chapter 10, "Natural Gas Investment Tax." The relevant provisions of Chapter 10 have now been brought under relevant Articles of the ITL. 2. Taxable activities of natural gas investment companies will now be subject to Corporate Income Tax (CIT) at a rate of 20%, and not 30% as per the original law. 3. Persons engaged in both production of oil and hydrocarbons, and natural gas are required to compute the tax bases of each of these activities independently and claim the related deductible expenses. Similarly, carried forward net operating losses of an activity can be offset against the same activity's taxable profit. Natural Gas Investment is defined as the activity of exploration and production of non-associated natural gas, including gas condensers, as well as the business of assembling, purifying, processing, retailing and transporting associated and non-associated natural gas and their liquids, gas condensates and other associated elements. Natural Gas Transportation is defined as the process of transporting associated and non-associated natural gas from purification plants to treatment plants and to retail plants, or transferring them from any of these plants to consumer facilities, as well as the transfer of gas condensates and liquids. This does not include local distribution networks and pipelines created by a non-Gas producer after the official point of sale. Amended Article 6(f): The tax base of a person engaged in the production of oil and hydrocarbons shall be his taxable income from that activity less allowable expenses under this law, and shall not include the tax base related to his Investment in the Natural Gas. Addition of para (g) to Article 6: The tax base of a person engaged in the field of natural gas investment shall be his taxable income from the field of natural gas investment less allowable expenses under this law. This tax base is independent of the tax base relating to his other activities. Amended Article 7(b): The tax rate of the tax base for a taxpayer engaged in the field of Natural Gas Investment will be 20%. Addition of para (e) to Article 7: The tax due on the persons engaged in the Kingdom, both in the field of oil and hydrocarbons and in the field of natural gas investment, shall be sum of the tax due on both tax bases in accordance with paras (b) and (c) of Article 7. Amended Article 8 of ITL: Additional income derived from activity in the field of natural gas investment, is the total income from the sale, exchange or conversion of natural gas and its liquids and condensates, including sulfur and other products, and any other income the taxpayer earns from an incidental or non-operating source related to its principal activity, its type and source, including income from exploitation of surplus capacity in one of the facilities of natural gas investment activity. Addition of para (d) to Article 21: Net operating losses arising from natural gas investment activities cannot be offset against the tax base of oil and hydrocarbons activities or vice versa.
Document ID: 2018-5550 |
