What is Tax Base?
The tax base is the total amount of income, assets, sales, or transactions subject to a particular tax. The tax due is computed by multiplying the tax base by the applicable tax rate.
How It Works
- Define the scope of the tax (income, value-added, property).
- Apply exemptions and deductions to arrive at the taxable amount.
- Multiply by the rate to compute liability.
Saudi Context
Saudi VAT base is the value of taxable supplies after exemptions; corporate tax base is the adjusted taxable profit; Zakat base is a separate calculation focused on net worth.
Example
A Saudi retailer has SAR 5 million sales, of which SAR 500K are exempt. Its VAT base is SAR 4.5 million, generating SAR 675K of output VAT at 15%.