Income tax base
In one sentenceThe income on which income tax is calculated: gross taxable income less deductible expenses and the carried-forward losses allowed by law.
Simply put
The tax is not calculated directly on accounting net profit; it is first adjusted: non-deductible expenses are added back, and allowable items are deducted.
In mixed-ownership companies, the tax is calculated on the share of this base belonging to the partners subject to income tax.
Worked example
A company has taxable revenues of 2,000,000 SAR and deductible expenses of 1,500,000 SAR, with no carried-forward losses.
Taxable income2,000,000 SAR
Deductible expenses1,500,000 SAR
Calculation2,000,000 − 1,500,000
Tax base500,000 SAR
Formula: Tax base = taxable income − deductible expenses − carried-forward losses allowed for deduction
Don't confuse it with
Zakat baseThe Zakat base is built on sources of financing and assets, while the tax base is built on adjusted profit.