Saudi Arabia on Monday cut taxes on oil companies in a major move that could attract investments in its energy giant Aramco.
Custodian of the Two Holy Mosques King Salman issued a Royal decree announcing new set of income tax rates on oil companies working in the Kingdom, ranging from 50 percent to 85 percent depending on the firms’ investments.
Earlier it was 85 percent across the board.
The Royal decree said that companies investing more that SR375 billion ($100 billion) will be subject to a 50-percent tax rate.
“Saudi Aramco’s tax rate is reduced from 85 percent to 50 percent, bringing it in line with international benchmarks,” the government-owned oil giant said on its Twitter account following the decree.
“The Royal decree concerning taxes is in the interest of the Kingdom, its citizens and future generations,” said Minister of Energy, Industry and Mineral Resources Khalid Al-Falih.
He described the Royal Decree to reduce taxes on oil and hydrocarbon producers in the Kingdom as a positive step that will boost State’s policies of diversification of income sources.
He said the new taxation is in line with international rates.
He said that any reduction in tax returns that might occur due to this decree will be compensated by distributing profits by state-owned companies and other income sources.
The imposition of income tax on oil and hydrocarbon producers in the Kingdom will be as follows:
50% on companies whose total invested capital in the Kingdom exceeds SR375 billion.
65% on companies whose total invested capital in the Kingdom is between SR300 billion and SR375 billion.
75% on companies whose total invested capital in the Kingdom is in the range of SR225 billion and SR300 billion.
85% on companies whose total invested capital in the Kingdom does not exceed SR225 billion.
In order to implement the above, total invested capital means the total value of cumulative fixed assets including properties, machinery, equipment, tools, etc. This also includes intangible assets, like oil and hydrocarbon exploration and development. This is before deduction of consumption and firefighting.
The tax will be imposed with retrospective effect from Jan. 1, 2017.