Saudi Arabia cuts tax rates on oil firms to woo investors

RIYADH: Saudi Arabia yesterday cut taxes on oil companies in a major move that could attract investments in its energy giant Saudi Aramco, expected to be offered to investors next year.

King Salman decreed a new set of income tax rates on oil companies working in the kingdom, ranging from 50 to 85 per cent depending on the firms’ investments, after it was 85 per cent across the board.

The royal decree published yesterday said companies investing more that 375 billion riyals (RM441 billion) will be subject to a 50 per cent tax rate.

“Aramco’s tax rate is reduced from 85 per cent to 50 per cent, bringing it in line with international benchmarks,” the government-owned oil giant said on its Twitter following the decree.

Saudi Arabia plans to sell five per cent of Aramco next year, as part of efforts to build up a large sovereign wealth fund. The sale falls within the kingdom’s strategy to diversify its oil-dependent economy away from hydrocarbons.

“The royal decree concerning taxes is in the interest of the kingdom, its citizens and future generations,” said Energy Minister Khalid al-Falih.

Aramco chief Amin Nasser said the royal order “is positive for the kingdom's economic diversification”, and in line with the “Vision 2030” for economic reforms led by the king’s son, Deputy Crown Prince Mohammed Salman.

The kingdom has intensified economic reform efforts after oil prices plunged last year below US$40 per barrel from above US$100 in 2014. AFP