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Saudi Arabia lowers tax rates for oil companies

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Staff Writer | March 28, 2017
Saudi Arabia dropped the tax rate on its oil industry, marking a significant move to lay the groundwork for a highly anticipated initial public offering of its state-owned energy company, Saudi Aramco.
Saudi Arabia oil
Oil production   In line with international benchmarks
Under changes announced by a royal decree, Saudi Arabian Oil Co., Aramco, said its tax rate would fall to 50% from 85%, bringing the company "in line with international benchmarks." The decree didn't address the 20% royalty Aramco pays the kingdom.

The tax change addresses a potential concern for would-be Aramco investors and represents a step in a flurry of changes at the company as the Saudis prepare to list up to 5% of its national crown jewel.

The company has already hired independent auditors to examine its crude-oil reserves and a raft of bankers, press relations consultants and advisers to help make the listing happen.

The Aramco IPO is expected to be among the largest ever and the proceeds are supposed to be directed toward a Saudi national transformation effort known as Vision 2030, meant to diversify its economy.

Generating more revenue from non-oil sources is key to the success of Riyadh's economic vision. Saudi Arabia depends on oil revenue for 62% of government revenue, down from 73% in 2015.

The government estimated non-oil revenues totaled 199 billion Saudi riyals last year - still significantly short of the 530 billion-riyal target ($141.3 billion) it set for non-oil income by 2020.