Saudi Aramco’s income and zakat taxes rose 80.7 percent during the first nine months of this year, reaching 251.2 billion riyals, compared to 139 billion riyals in the same period last year, as a result of increased profits.
The company's profits rose by 121.6 percent during the first nine months of this year, reaching 291 billion riyals compared to 131.3 billion riyals in the same period last year. Meanwhile, profits in the third quarter increased by 158.1 percent, reaching 114.1 billion riyals compared to 44.2 billion riyals, due to higher oil prices and increased sales.
Saudi Aramco is subject to a 20 percent income tax rate on exploration and production activities of non-associated natural gas, including gas condensates, as well as the collection, processing, preparation, fractionation and transportation of associated and non-associated natural gas, its liquids, gas condensates and other associated elements, and is subject to a 50 percent income tax rate on all other activities, according to the Income Tax Law.
Effective January 1, 2020, the tax rate applied to the company’s refining and processing activities was reduced from 50 percent, as applied to eligible domestic oil and hydrocarbon production companies, to the general corporate tax rate of 20 percent, as applied to similar domestic refining and marketing companies, in accordance with the Income Tax System.
The new price is conditional on the company separating its refining, processing and marketing activities under the control of one or more fully separate subsidiaries before December 31, 2024. Otherwise, the company’s refining, processing and marketing activities will be subject to retroactive tax at a rate of 50 percent. The company expects to transfer all of its refining, processing and marketing activities to a separate regulatory facility within the specified period.
The corporate income tax was amended, whereby shares owned directly or indirectly by persons working in the production of oil and hydrocarbon materials in resident capital companies listed on the Saudi Stock Exchange “Tadawul” were exempted from the application of corporate income tax.
As a result, the company’s shares in SABIC, Petro Rabigh, Bahri and the Saudi Electricity Company are now subject to zakat, and zakat is levied on the basis of the adjusted zakatable income or the zakat base, according to the regulations in the Kingdom, whichever is higher.
Zakat is calculated using the zakat base and the zakat provision is charged to the summary income statement. According to Aramco's statements, the income tax and zakat expense is based primarily on income generated in Saudi Arabia.
