Saudi Arabia is a gateway to new opportunities

Saudi Arabia may offer new trade and investment opportunities for UK businesses following Brexit which could create a gateway to new markets in the Middle East and Africa, according to Saudi ministers.

By Helen Cowley, senior director and tax specialist at Cassons, part of the Baldwins Group.

Trading with Saudi from the UK may involve the shipping of goods from the UK to Saudi, or the provision of services in the Kingdom.

If your company is UK registered and tax resident, and you do not have a permanent establishment in Saudi Arabia, any profits generated from the business should be taxable in the UK, although Saudi withholding taxes can be levied on certain payments made to non-residents.

Saudi tax regulations define a permanent establishment (PE) as “a permanent place through which a non-resident carries out business in Saudi Arabia, in full or in part, including through an agent”.

When exporting to Saudi, care should be taken in negotiating and concluding contracts to ensure that a PE is not inadvertently created by dependent agents or employees finalising deals on a habitual basis in the Kingdom.

The provision of consultancy services should not create a PE so long as employees or other personnel do not provide services in Saudi for the same or a connected project for an aggregate period of more than six months in any 12-month period. Once a PE is created, the foreign entity must register a branch in the Kingdom and pay corporate tax at a rate of 20 per cent on income arising from or relating to the PE.

The Saudi Tax Authority is adopting a strict assessment of PEs and extra care should be taken when concluding contracts with Saudi customers including the tenure of contracts for services. There are other tax implications of doing business in the Kingdom. For advice on taxes in Saudi Arabia, it is imperative that you take specialist advice from Saudi Arabian advisers.