Under new rates imposed by the government, hydrocarbon companies in Saudi Arabia with capital of more than 375 billion riyals ($100 billion) will have to pay a 50 percent tax on income, according to a statement from the official Saudi Press Agency. The Saudi Arabian Oil Co., known as Saudi Aramco, plans to sell up to 5 percent of the company in an IPO next year that the kingdom estimates could value the company at about $2 trillion.
Aramco currently pays a 20 percent royalty on its revenue and an 85 percent tax on income. Aramco Chief Executive Officer Amin Nasser said in January that Saudi Arabia will reduce the company’s overall tax rate to make the share sale more attractive to investors.
The Aramco IPO is part of a plan by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons. The share sale, if it meets the government’s estimate, would dwarf that of Alibaba.
Hydrocarbon companies with capital of between 300 billion and 375 billion riyals will pay an income tax of 65 percent, under the new rules. Companies with capital of between 225 billion and 300 billion riyals will pay 75 percent, and those with capital below 225 billion riyals 85 percent, according to SPA.