Withholding Tax rules in Saudi Arabia

A non-resident who don’t have establishment in the Kingdom is subject to tax for any amount realized from a source in the Kingdom and the tax is withheld at the following rates of gross amount:

Type of payment	Rate
– Management fees	20%
– Royalties or proceeds; payments for services to a head-office or related company	15%
– Payments for rent; payments for technical and consulting services; payments for air tickets, air freight and maritime freight; payments for international telecommunications services; dividends; loan charges; insurance or reinsurance premiums	5%
– Other payments	15%

It is obligatory to every resident, whether or not a taxpayer according to Tax Law, and a permanent establishment of a non-resident in the Kingdom which pays an amount to a non-resident from a source in the Kingdom shall withhold tax from the paid amount.

A. A person withholding tax under this Article shall comply with the following:

1.Registering with the Department and pay the amount withheld to the Department within the first ten days from the month following the month of payment to the beneficiary.

2.Filing withholding information for each fiscal year on the form prescribed by the Department not later than 120 days of the end of the fiscal year, and not later than 60 days of the end of the fiscal year for partnerships

3.Providing the beneficiary with a certificate stating the value of the amount paid to him and the value of the tax withheld.

4.Providing the Department, at the end of the taxable year, with the name, address, and the beneficiary’s registration number (identification number), if available, along with any other information the Department may require.

5.Maintaining records required to prove the correctness of the withheld tax as specified by the Regulations.

B. The person responsible for withholding tax is personally liable to pay the unpaid tax and any delay fines resulting there from in accordance with paragraph (a) of Article Seventy Seven, if any of the following cases applies to him:

1.If he fails to withhold tax as required.

2.If he withholds tax, but fails to pay the tax to the Department as required,

3.If he fails to report withholding statements to the Department as stipulated under subparagraph (3) of paragraph (b) of this Article.

D. If tax is not withheld in accordance with the provisions of the Tax Law, the beneficiary remains indebted to the Department for the amount of tax and the Department may recover it from him, his agent or sponsor.

E. If the amount referred to in this Article is paid to a non-resident who conducts business in the Kingdom through a permanent establishment, and the amount paid was directly connected with the business of the establishment, such amount shall be calculated in determining the tax base of the non-resident.

F. If tax is withheld for an amount paid to a taxpayer who is included in its tax base, the tax withheld shall be deducted from the tax due on the taxpayer against the tax base.

G. “Services” mean any work performed for compensation, except for the purchase and sale of goods or any other properties.

Read more blogs here and for information on ZATCA click here.

For more training courses on Tax/ VAT click here and following are other taxation related training programs for Saudi Arabia: –