Saudi Arabia's Crypto Adoption Grows Despite Regulatory Ambiguity

Saudi Arabia has seen a growing adoption of Bitcoin, stablecoins, and decentralized finance (DeFi) despite the lack of legal tender status for these cryptocurrencies. The increasing volume of trading on offshore exchanges and peer-to-peer platforms is driven by a young, tech-savvy population and the widespread use of mobile banking. However, the ambiguous regulatory environment poses compliance risks for traders. Understanding how the Zakat, Tax and Customs Authority (ZATCA) treats crypto today and in the future is crucial for anyone interested in buying, selling, or developing Web3 services in the Kingdom.

The primary tax authority in Saudi Arabia is ZATCA, with key financial authorities including the Saudi Central Bank (SAMA) and the Capital Market Authority (CMA). Both SAMA and CMA have warned against virtual currencies, as they are not monitored by the government. Cryptocurrencies are not considered legal tenders, and there is no special law on crypto-taxes until June 2025. The ruling laws include the Income Tax Law (2004) and its bylaws, which set a base rate of 20% for corporate taxes. The Anti-Money Laundering Law (2017) and the Countering the Financing of Terrorism Law (2017) include electronic or digital funds, making crypto fall under the scope of AML regulations. Regulators do not view crypto as a currency but as an asset for speculators, and it may be classified under intangible property in the future.

In Saudi Arabia, there is no Capital Gains Tax (CGT) imposed on individuals, but a 15% CGT may arise if crypto is treated as business assets. Corporate Income Tax is set at 20% of the net profits for both resident and foreign companies, including crypto undertakings. The standard Value-Added Tax (VAT) rate is 15%, but crypto trades are not within its scope as tokens are neither regarded as a service nor a good. Zakat is levied at 2.5% of the zakat base of Saudi-owned entities, and crypto holdings may be treated as inventory. There are no specific regulations for withholding or excise taxes on crypto.

Individuals in Saudi Arabia do not pay CGT or personal income taxes. Corporations face a 20% crypto tax on income, with higher tax rates (50-85%) only on oil and hydrocarbons. If crypto is considered a capital asset as part of business, the CGT on trade property is 15%. Zakat is set at 2.5% of Saudi-share capital, and VAT is 15% on the fees of cryptocurrency services, such as exchange commissions.

Purchasing crypto using fiat is not taxable for individuals, but it is advisable to keep a purchase history. Selling crypto in fiat is tax-free for individuals, while corporations realize gains as business revenue. Crypto-to-crypto swaps are considered barter, and enterprises realize profit in Saudi riyal at fair-market value. Mining rewards are taxed as business income when mining becomes commercial. Staking and DeFi yield are regarded as interest, and companies accrue to taxable income when tokens are charged. Crypto-salary must be converted into SAR equivalent and reported as payroll by employers. NFT sales are unregulated, but proceeds from corporate issuers should be included in taxable revenue.

There is no specific crypto return by ZATCA. Companies supplement crypto revenues to regular income-tax declarations and save VAT invoices of fee-based services. It is recommended to keep wallet addresses, transaction hashes, exchange statements, and daily SAR conversion rates. E-invoicing is compulsory for the majority of VAT-registered organizations, and the ZATCA Fatoora platform allows cross-checking blockchain information and e-invoice trails. Filing deadlines correspond to regular corporate times, and failure to file on time results in increasing fines.

Business taxpayers can deduct ordinary and necessary items on crypto operations, such as mining equipment, cloud-node charges, custodial insurance, and gas expenditures. Losses on trading activities can be used to counter cryptocurrency gains in the same tax year; otherwise, they are rolled over according to general corporate provisions. Exchange service fees are subject to input VAT, which can be reclaimed as output VAT when the relevant e-invoices are maintained. Individuals do not pay income tax, making deductions meaningless on the individual level.

ZATCA uses mandatory Know Your Customer (KYC) procedures for local banks, Exchange-as-a-Service providers, and FinTech sandboxes to track crypto cash-in and cash-out. Blockchain-analytics vendors are also employed to identify large transactions sent through mixers. Failure to register, file, or pay may result in fines ranging from 5% to 25% of unpaid tax, a 25% surcharge and reassessment of audit for false returns or evasion, and criminal fraud fines of up to three times the amount of tax avoided, along with five years of imprisonment. A national amnesty remits the majority of late penalties until June 2025, allowing businesses to regularize crypto income. The constant integration of e-invoicing and data-matching implies that detection chances are growing every month.

The working groups of SAMA and CMA are developing a complete crypto-asset framework, likely to be released in 2026. Consultations suggest licensing exchanges, formal CGT protocols, and possibly 0% tax incentives within FinTech sandboxes to compete with other regions. Investors should monitor sudden policy changes through royal decrees and ZATCA circulars, which might require reporting of transactions or withholding of offshore exchange withdrawals.

Currently, Saudi Arabia does not tax personal crypto gains but levies normal business taxes on business operations. Maintaining a high level of records, making e-invoices where necessary, and filing within the time to take advantage of the 2025 no-penalty waiver is advisable. Remaining in compliance helps traders avoid hefty penalties or imprisonment as surveillance increases. Since policy is still changing, it is recommended to consult a Saudi-qualified tax adviser before making major trades or starting a Web3 startup.