1Issue 2 | May 2026

Concept of Residency under the Income Tax Law The concept of residency, in accordance with the provisions governing Income Tax, varies depending on the legal nature of the person to whom the provision applies. With regard to natural persons, a natural person shall be considered a Resident in the Kingdom during the relevant tax year if either of the following conditions is met: 7. The person has a permanent residence in the Kingdom, whether owned, leased, or provided by another party, provided that the person is also present in the Kingdom for a total period of not less than 30 days during the tax year, whether consecutive or non-consecutive. 8. The person resides in the Kingdom for a period of not less than 183 days during the relevant tax year, whether consecutive or non-consecutive, even if the person does not have a permanent residence. “Permanent residence” refers to a dwelling owned by a natural person, or leased under rental contracts during the tax year for a total period of not less than one year, or a residence provided to a natural person by any other party during the tax year for a period of not less than one year. The nationality of the person shall not be taken into account in determining the place of residence. A person, whether natural or legal, shall be considered non-resident in the Kingdom if the residency conditions specified in the provisions governing Income Tax are not met. For this purpose, residency for part of a day shall be counted as residency for a full day. Transit stays, regardless of their duration, shall not be counted as residency if they constitute mere passage between two points outside the Kingdom. With regard to legal entities, a company shall be considered a Resident in the Kingdom during the relevant tax year if either of the following conditions is met: 9. It is established in accordance with the Saudi Companies Law, such that it is incorporated, registered, its Articles of Association are documented, and its activities are conducted in accordance with its provisions. 10. Its Place of Effective Management is located in the Kingdom, even if it is incorporated outside the Kingdom. The Place of Effective Management means the place where senior policies are primarily formulated and where key administrative and commercial decisions necessary for conducting the company’s business are made. The Place of Effective Management shall be deemed to be in the Kingdom where at least 2 of the following 3 conditions are met(1): a. Regular meetings of the Board of Directors are held in the Kingdom, during which key decisions related to the management and operation of the company are made. b. Senior executive decisions, such as decisions of the Chief Executive Officer and their deputies, are taken in the Kingdom. c. The majority of the company’s activities generate the majority of its revenues therein. If a capital company, as defined in the preceding paragraph, becomes resident in the Kingdom, it shall be subject to all statutory provisions and requirements applicable to all resident capital companies and shall be required to file its annual income tax returns for income earned from its operations and the operations of its branches inside and outside the Kingdom.