Looking to dispose listed equity on Tadawul or Nomu (Parallel Market)? Saudi rules generally provide a capital gains tax exemption for qualifying disposals of listed shares—an important lever for corporate taxpayers in Saudi Arabia planning exits, treasury strategies, or group restructurings. This SEO-oriented guide explains scope, typical conditions, documentation, red flags, and filing touchpoints with ZATCA.
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Executive Snapshot
- What’s potentially tax-free? Capital gains on the disposal of listed Saudi shares executed through the exchange, when statutory conditions are met.
- Who benefits? Resident corporations, non-residents (with or without a PE, depending on facts), and mixed-ownership entities—subject to eligibility and documentation.
- What is not covered? Typically unlisted share deals, private transfers off-market, or disposals that fail listing/lock-up rules or anti-avoidance conditions (taxable at the general 20% CIT for the taxable portion).
- VAT interaction: Trading in shares is generally outside the scope of VAT in KSA; no output VAT on the sale, no input VAT recovery on acquisition costs unless separately taxable services are involved.
Scope of the Listed-Share Capital Gains Exemption
While the exemption is a headline rule, it is conditioned by the nature and mechanics of the transaction. Key elements practitioners test:
- Listing status: Shares are admitted to trading on Tadawul or Nomu at the time of disposal.
- Execution venue: Disposal is through the exchange (cleared/settled per market rules). Private off-market trades may not qualify.
- Founders/lock-ups: Disposals of pre-listing or founder shares during restricted/lock-up periods may have special conditions.
- Anti-avoidance/substance: Arrangements whose main purpose is tax avoidance can be denied relief; maintain business rationale.
- Residency/PE: Non-resident sellers typically rely on the listed-share exemption; if a PE attribution applies, review facts carefully.
Bottom line: If your sale is an on-exchange disposal of listed Saudi shares and you comply with market and tax rules, the capital gain is generally tax-exempt in KSA.
Resident vs. Non-Resident: Typical Outcomes
| Seller Profile | Asset | Saudi Tax Result | Notes |
|---|---|---|---|
| Resident CIT payer | Listed shares (on-exchange) | Capital gain exempt | Keep broker statements & board approvals |
| Resident Zakat payer | Listed shares (on-exchange) | Capital gain exempt (no CIT) | Consider Zakat base impacts (equity, investments) |
| Mixed ownership company | Listed shares (on-exchange) | Exempt gain; still allocate book effects across CIT/Zakat shares | Maintain ownership split workpapers |
| Non-resident (no PE) | Listed shares (on-exchange) | Capital gain generally exempt | Confirm exchange execution & eligibility |
| Non-resident with PE | Listed shares used in PE business | Exemption typically relied upon; test PE attribution | Document facts; avoid hybrid/related-party pitfalls |
| Any seller | Unlisted shares (off-exchange) | Not exempt: general 20% CIT on net gain for the taxable portion | Treaties may affect non-residents |
Compliance Pack: Evidence ZATCA Examiners Expect
- Broker contract notes & statements showing on-exchange execution, dates, quantities, and prices.
- Share registers/ISIN details confirming listing at time of sale; Nomu/Tadawul ticker evidence.
- Board minutes approving the disposal; treasury policy excerpts if applicable.
- Accounting memos mapping recognition, fair value treatment (IFRS 9), and tax position.
- Anti-avoidance memo (purpose/substance) if the facts involve group reorganizations or concentrated trades.
VAT & Withholding Tax Interactions
- VAT: Trading listed shares is generally outside VAT scope—no output VAT, and input VAT on directly related costs is usually non-recoverable unless linked to taxable activities (e.g., advisory bundled with taxable services).
- WHT: Capital gains are not a WHT category in KSA; dividends remain subject to 5% WHT for non-residents (treaty relief possible with documentation).
Planning Tips to Protect the Exemption
- Use the exchange: Ensure trades are executed and settled on Tadawul/Nomu—not as private transfers.
- Mind lock-ups: Respect founder/insider sale restrictions; collect exchange/issuer confirmations where relevant.
- Substance & purpose: Record commercial rationale to counter GAAR/anti-avoidance challenges.
- Mixed ownership: Keep CIT vs. Zakat allocations tidy; gains are exempt, but equity/Zakat impacts persist.
- Treaties & non-residents: Keep current residency certificates and beneficial-ownership analysis for broader capital market moves.
Illustrations (For Training Purposes)
| Scenario | Mechanics | Saudi Tax Outcome | Notes |
|---|---|---|---|
| Resident company sells listed shares via Tadawul | On-exchange trade; T+2 settlement | Capital gain exempt | Archive broker notes & board minutes |
| Non-resident fund exits listed position | Exchange trade through local broker | Capital gain generally exempt | Confirm no PE attribution; keep residency docs for broader filings |
| Off-market transfer of listed shares within group | Private SPA; not executed on exchange | Exemption may not apply; test reliefs/20% CIT exposure | Consider qualifying intra-group reliefs; secure valuations |
Deal Checklist (Before You Click “Sell”)
- Verify listing status and execution venue (Tadawul/Nomu).
- Collect broker confirmations, contract notes, and settlement statements.
- Prepare a short tax memo citing exemption, anti-avoidance guardrails, and accounting treatment.
- Update treasury policy and board approvals for disposals and thresholds.
- For non-residents, check any registration/clearance formalities and treaty angles.
