Corporate Restructuring in Saudi Arabia: Navigating Tax and Valuation Complexity for 2026 Transactions

For transactions expected to close in 2026, the interaction between valuation, tax structuring, and compliance has become more nuanced and less forgiving. Successful restructuring now requires early integration of these disciplines into deal planning rather than post-transaction remediation. This article outlines the key tax and valuation considerations relevant to corporate restructurings in the Kingdom, reflecting the legislative and regulatory environment as of late 2025 and its practical implications for 2026-era deals. 

The Saudi Tax Framework: Key Considerations in Restructuring

Corporate Income Tax and Zakat

Saudi Arabia continues to operate a dual regime under which foreign-owned entities are subject to a 20 percent corporate income tax. At the same time, entities with Saudi and GCC ownership interests fall within the Zakat framework subject to 2.58% on their Zakat base. The new Zakat reforms, effective from 1 January 2024, have introduced more precise and prescriptive treatments for mergers, acquisitions, business reorganisations, cessations, and legal-form conversions.

These reforms reinforce a balance-sheet-based Zakat methodology, with greater emphasis on asset and liability classification, consistency with accounting standards, and enhanced documentation. For restructuring transactions, this has increased the importance of modelling ownership changes, transitional financial periods, determination of debt / equity split, and the post-transaction asset mix well in advance of execution.

Value Added Tax and Real Estate Transaction Tax

Value Added Tax remains a central consideration in restructuring transactions, particularly where business units, assets, or real estate forming part of an ongoing economic activity are transferred. Recent amendments to the VAT Implementing Regulations in 2025 introduced greater clarity and stricter conditions in areas such as  VAT group registration, transfers of a going concern (‘TOGC’), nominal (deemed) supplies, and registration / compliance requirements, all of which may materially influence deal structure for M&A and corporate restructuring Furthermore, the mandatory roll‑out of e‑invoicing (FATOORA) for VAT‑registered businesses means that taxable supplies of assets made in the course of a restructuring must be documented electronically in near real time, making VAT compliance an integral element of planning and executing deals in the Kingdom of Saudi Arabia.

In parallel, the Real Estate Transaction Tax regime, updated via the 2025 KSA RETT Law and its Implementing regulations, continues to apply to all property disposals, including scenarios where movable assets are permanently allocated to serve real estate. Failure to assess RETT exposure at the re-structuring stage may result in unexpected tax costs, particularly in asset-heavy restructurings, internal group transfers, and future external sales where real estate is in scope.  Certain specific reliefs are provided in the new RETT law to encourage M&A activities / corporate restructuring, provided the stipulated conditions are met. 

Valuation Challenges in Restructuring Transactions

Valuation lies at the centre of most restructuring decisions, determining not only commercial economics but also accounting outcomes and tax exposure. In the Saudi context, challenges often arise from differences among the negotiated transaction value, the accounting fair value, and the tax or Zakat bases.

Acquisitions and mergers require fair-value assessments of identifiable net assets as of the acquisition date, which frequently result in goodwill recognition. While goodwill and synergies may underpin the commercial rationale of a transaction, they do not always align with tax deductibility or Zakat base treatment. Intangible assets, including intellectual property, customer relationships, and brand value, are particularly sensitive, especially where related-party transactions or group reorganisations are involved.

Post-transaction, goodwill and intangible assets are generally subject to impairment testing. Beyond compliance, these assessments play a strategic role in portfolio evaluation, capital allocation, and longer-term business planning.

For restructurings anticipated in 2026, valuation models should incorporate robust fair value adjustments, defensible intangible valuations, realistic synergy assumptions, and tax-aware forecasts for depreciation, amortisation, and impairment that align with Saudi tax and Zakat requirements to maximize tax deductions.

Tax and Zakat Implications Specific to Restructuring

Restructuring transactions in the Kingdom often trigger immediate tax and Zakat consequences. Asset transfers may result in the recognition of gains or losses, while share acquisitions establish a new cost base for future capital gains purposes. 

The 2024 Zakat regulations provide more explicit guidance on mergers and reorganisations, including treatment of short or long financial periods following restructuring. However, changes in legal form, ownership composition, debt / equity split, or asset profiles can materially alter Zakat exposure and must be modelled holistically.

Transfer pricing considerations remain central, particularly where restructurings involve related parties, cross-border elements, or the relocation of intangible assets. Business reorganisations that shift value through intellectual property, service models, or financing arrangements are subject to heightened scrutiny, increasing the importance of robust valuation support and contemporaneous documentation.

Strategic Considerations for 2026 Restructuring Deals

Businesses planning restructurings in 2026 should adopt an integrated approach that aligns commercial objectives with valuation discipline and tax optimization / compliance. Key priorities include early-stage tax and Zakat modelling before deal terms are finalised to minimize tax leakage, comprehensive fair-value assessments of tangible and intangible assets, thoughtful transaction structuring to manage VAT and RETT exposure, and strong documentation to support tax / Zakat base calculations and transfer pricing positions.

Equally important is post-transaction integration, including processes for monitoring goodwill, reassessing asset values, and maintaining compliance as the regulatory environment continues to evolve.

Corporate restructuring in Saudi Arabia presents significant opportunities to unlock value, enhance operational efficiency, and reposition businesses for long-term growth. However, the Kingdom’s increasingly sophisticated tax, Zakat, VAT, and real estate regimes demand a disciplined and forward-looking approach.

For 2026 transactions, success will depend on early alignment between strategy, valuation, and tax structuring, supported by robust analysis and documentation throughout the transaction lifecycle. Engaging tax and valuation specialists at the outset is essential to managing risk and delivering sustainable outcomes in an increasingly complex deal environment.