The kingdom's consultative Shura Council, whose decisions are not binding but are usually endorsed by the government, approved the recommendation on Monday. It could be approved by the cabinet as early as next week, sources said.
"It should be ratified soon. Probably in the next few weeks," Shura member Ihsan Bu-Hulaiga told Reuters.
He said the tax is levied on profits of foreign investments, or the foreign share of a joint venture. Expatriate workers pay no individual income tax in Saudi Arabia.
Economists say the world's biggest oil exporter must do more to attract investment to diversify its petroleum-dominated economy and create jobs for a rapidly growing population.
The proposed cut followed an earlier reduction from 45 percent in 2000, when the kingdom launched its drive for foreign investment and set up the Saudi Arabian General Investment Authority (SAGIA), Bu-Hulaiga said.
"This will improve the competitiveness of Saudi Arabia but we also need to pay attention to other obstacles to investment - including bureaucracy and government procedures - and open up all sectors to foreign investors," he said.
Analysts say bureaucratic barriers are as much of a brake on investment as security fears caused by bombings of foreign housing compounds which killed more than 50 people last year.
Saudi Arabia has begun opening up its tightly-controlled banking system and gas industry to majority foreign-owned projects. But its upstream oil industry has remained off-limits since nationalisation in the 1970s.
Since its inception in August 2000, SAGIA has licensed investment projects in the kingdom worth 45.85 billion riyals ($12.23 billion). But only a small fraction of those have so far been implemented.
US investors have injected the most capital, followed by Japanese investors.
Bu-Hulaiga said although it was becoming increasingly competitive regionally, Saudi Arabia was still falling short of its goals. Investment as a proportion of gross domestic product was hovering between 18 and 20 percent, he said.
"That is too low for an economy like Saudi Arabia. It should be in the high 20s or low 30s," he said. A ratio nearer to 34 percent would help generate the economic growth of five or six percent a year necessary to tackle rising unemployment.