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With Saudi Arabia’s economy evolving rapidly under Vision 2030, tax compliance has become more crucial than ever especially for international businesses and expats. One of the most important components of the Saudi tax landscape is the Withholding Tax in Saudi Arabia.
Whether you’re a foreign investor, service provider, or simply doing business in the Kingdom, understanding how withholding tax works can save you from costly surprises.
What Is Withholding Tax in Saudi Arabia?
Withholding Tax (WHT) in Saudi Arabia is a tax deducted at source on certain payments made by a Saudi resident to a non-resident party for services rendered. These payments typically include:
- Royalties
- Interest
- Technical and consulting services
- Rent of equipment
- Dividends
The purpose? To ensure that foreign entities doing business in Saudi Arabia contribute a fair share to the tax system, even if they don’t have a physical presence in the Kingdom.
Who Must Pay Withholding Tax?
If your company in Saudi Arabia makes payments to any non-resident entity, you’re responsible for deducting and remitting the withholding tax to ZATCA (Zakat, Tax and Customs Authority).
Some common scenarios include:
Hiring a foreign consultant
Paying license fees to an overseas software company
Leasing machinery from a non-GCC vendor
This applies regardless of whether the services were provided inside or outside the Kingdom.
Withholding Tax Rates in Saudi Arabia (2025)
Here’s a quick breakdown of the applicable rates:
|
Type of Payment
|
WHT Rate
|
|---|---|
|
Rent for equipment
|
5%
|
|
Royalties
|
15%
|
|
Management fees
|
20%
|
|
Technical/Consulting services
|
15%
|
|
Interest
|
5%
|
|
Dividends to non-residents
|
5%
|
Note: These rates are subject to change based on Double Taxation Avoidance Agreements (DTAs) that Saudi Arabia has signed with various countries.
How to File and Pay Withholding Tax in Saudi Arabia
Saudi businesses are required to:
- Deduct the appropriate amount before making the payment to the foreign entity.
- Submit the WHT return to ZATCA within the first 10 days of the month following the payment.
- Pay the tax at the same time to avoid late penalties.
All returns and payments can be processed through ZATCA’s online portal for convenience.
Are There Any Exemptions?
Yes. Not all payments to non-residents are taxed. Exemptions may apply under the following circumstances:
Transactions with resident entities or those in GCC countries with a physical presence in Saudi Arabia.
Certain government or diplomatic services.
Double Tax Treaties (DTTs) may allow lower rates or full exemption.
It’s always best to consult a tax advisor or review the specific treaty with the concerned country.
Why It Matters: Business Impact
Failing to comply with withholding tax obligations in Saudi Arabia can lead to:
- Penalties of up to 25% of the unpaid tax
- Reputational damage
- Loss of credibility with clients and government entities
Pro Tips for Easy Compliance
- Check tax residency before finalizing contracts.
- Include WHT clauses in agreements with non-residents.
- Keep all invoices and contracts well-documented.
- Use ZATCA’s e-portal for faster filing and payments.
- Work with a tax consultant familiar with Saudi laws.
Final Thoughts
Understanding and complying with Withholding Tax in Saudi Arabia isn’t just a legal requirement it’s a smart business move. With increased focus on transparency and digitalization, the Saudi tax system is becoming more robust and efficient.
Whether you’re a startup founder, CFO, or legal advisor, staying informed on the latest WHT rules can help you avoid penalties and build long-term success in the Kingdom.
