The Saudi Department of Zakat and Income Tax has published a Q&A outlining their approach to source rules and tax nexus with Saudi Arabia in various factual circumstances. The Q&A can be consulted at: https://www.gazt.gov.sa/dzit_logon/FAQ.jsp?cat=13&ume.logon.locale=en
Dividends received from companies that are incorporated and registered in Saudi Arabia and from foreign companies authorized to operate in Saudi Arabia are deemed Saudi Arabian sourced.
Interest is deemed to be sourced in Saudi Arabia if (a) paid by Saudi Arabian residents; secured by Saudi property of any nature; or (c) related to an activity exercised in Saudi Arabia through a PE situated therein. For these purposes, interest is defined as remuneration for the use of monies, whether or not secured by mortgage and whether or not giving entitlement to (part of) the debtor’s profits.
Royalty fees paid for the use of intellectual property in Saudi Arabia, is deemed Saudi Arabian sourced.
Rental income from property situated in Saudi Arabia is deemed Saudi Arabian sourced.
Service (and consultancy) fees are deemed to be sourced in Saudi Arabia if the services are (a) provided to a Saudi resident, or (b) related to an activity carried out in Saudi Arabia. See Sec. 4.1. on concept of virtual service PE.
- Insurance and reinsurance premiums are deemed to be sourced from Saudi Arabia if (a) the insurer is resident in Saudi Arabia; (b) the insured property is situated in Saudi Arabia; or (c) the insured risk is situated in Saudi Arabia or related to a an activity carried out in Saudi Arabia.
- Income derived from the sale of goods manufactured or produced in Saudi Arabia is deemed to be sourced in Saudi Arabia.
- Goods imported into Saudi Arabia, including freight and insurance costs, are not deemed to be related to an activity exercised in Saudi Arabia. However, income related to connected services exercised within Saudi Arabia, including transportation within the country, assembly, maintenance or training, are deemed to be sourced in Saudi Arabia. If such connected services are not separately itemized, then their value is determined as 10% of the overall contract value.