A comprehensive guide for corporate taxpayers in Saudi Arabia on applicable depreciation rates for various asset classes under ZATCA rules, along with step-by-step guidance on how to claim them in tax filings.
📌 Introduction
Depreciation is a key tax deduction that allows businesses to recover the cost of capital assets over time. In Saudi Arabia, the Zakat, Tax and Customs Authority (ZATCA) specifies depreciation rates for different asset classes to standardise tax reporting and ensure compliance. Understanding these rates and the correct claiming process can help corporate taxpayers reduce taxable income and optimise cash flow.
🏢 Why Depreciation Matters for Corporate Taxpayers
- Reduces taxable income by allocating asset costs over their useful life.
- Encourages investment in business infrastructure and technology.
- Ensures accurate reflection of asset value in financial statements.
- Aligns with ZATCA’s compliance requirements to avoid penalties.
📊 ZATCA Depreciation Rates by Asset Class
| Asset Class | Depreciation Rate (% per annum) | Notes |
|---|---|---|
| Buildings (Non-Residential) | 5% | Excludes land value; applicable to commercial and industrial properties. |
| Buildings (Residential) | 5% | Used for staff housing or rental purposes. |
| Machinery & Equipment | 15% | Includes manufacturing and production machinery. |
| Motor Vehicles | 25% | Passenger and commercial vehicles; may vary for heavy-duty trucks. |
| Furniture & Fixtures | 10% | Office desks, chairs, shelves, and related assets. |
| Computers & IT Equipment | 33.33% | Shorter useful life due to rapid technological obsolescence. |
| Intangible Assets (e.g., Software) | Amortised over useful life | Must be based on contract period or expected usage period. |
These rates are as per ZATCA guidelines and may be updated periodically. Businesses should verify rates before filing returns.
🛠️ How to Claim Depreciation in Saudi Arabia
Step 1: Identify Depreciable Assets
Ensure the asset is used for business purposes and has a useful life exceeding one year.
Step 2: Determine the Cost Base
Include purchase price, import duties, installation costs, and other directly attributable expenses.
Step 3: Apply the Relevant ZATCA Depreciation Rate
Use the rate applicable to the asset class as per the ZATCA depreciation table.
Step 4: Record in Accounting Books
Maintain a fixed asset register with acquisition date, cost, rate, and accumulated depreciation.
Step 5: Claim in the Tax Return
Include depreciation expense in the corporate income tax computation submitted to ZATCA.
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📊 Example Scenario
A Saudi manufacturing company purchases new production machinery for SAR 1,000,000 in 2024. At a 15% depreciation rate, the allowable deduction for 2024 will be SAR 150,000, reducing the company’s taxable income accordingly. This continues annually until the asset is fully depreciated.
⚠️ Common Mistakes to Avoid
- Applying incorrect depreciation rates for asset classes.
- Failing to exclude land value when depreciating buildings.
- Not maintaining adequate documentation for asset purchases.
- Continuing depreciation after an asset is fully written off.
💡 Best Practices for Corporate Taxpayers
- Keep an updated fixed asset register.
- Review ZATCA’s latest guidelines annually before filing returns.
- Engage a professional tax advisor for complex asset portfolios.
- Perform periodic asset audits to verify physical existence and condition.
✅ Conclusion
Depreciation is a powerful tool for tax planning in Saudi Arabia, provided it is applied correctly in line with ZATCA’s prescribed rates. By categorising assets accurately, keeping thorough records, and following the correct claiming process, corporate taxpayers can maximise deductions while ensuring full compliance with tax laws.
