1Issue 2 | May 2026

Permanent Establishment in accordance with the Income Tax Law As a general rule, a Permanent Establishment in accordance with the Income Tax Law, of a non- resident in the Kingdom, consists of a fixed place of business through which the non-resident carries out its activity, wholly or partially. This includes activities carried out by a non-resident through an agent. These conditions serve to clarify the concept of the Place of Effective Management, noting that it is a broad concept pursu- ant to Minister of Finance Decision No. (2194) dated 12th Rajab 1432H/14th June 2011G. The Law enumerates a number of places that constitute a Permanent Establishment, including(2): 1. Construction sites, assembly facilities, and supervisory activities related thereto. 2. Installations and sites used in surveying natural resources, drilling equipment, vessels used in surveying natural resources, and supervisory activities related thereto. 3. A fixed base through which a non-resident natural person carries out their activity. 4. A branch of a non-resident company licensed to conduct business in the Kingdom. The term “agent” referred to above means a dependent agent who has any of the following powers: y To negotiate on behalf of the non-resident. y To conclude contracts on behalf of the non-resident. y To maintain a stock of goods in the Kingdom owned by the non-resident and regularly use it to fulfill customer orders on behalf of the non-resident. In addition, the place where a non-resident carries out insurance and/or reinsurance activities through an agent shall be considered a Permanent Establishment of the non-resident, even if the agent is not authorized to negotiate or conclude contracts on behalf of the non-resident. The Law also exempts certain places from the concept of a Permanent Establishment, such that a place shall not be considered a Permanent Establishment of a non-resident in the Kingdom if it is used solely for the following purposes: 1. Storage, display, or delivery of goods or products belonging to the non-resident. 2. Maintenance of a stock of goods or products belonging to the non-resident for the purpose of processing by another person. (2) This enumeration, and the counting of places that do not fall within the scope of a Permanent Establishment, is set out in