What is Withholding Tax (KSA)?
Withholding tax (WHT) in Saudi Arabia is the tax that a resident payer is required to deduct from payments made to a non-resident party for services rendered, royalties, dividends, interest, and similar payments under the Income Tax Law.
How It Works
- Identify the nature of the payment and the rate set by the Income Tax Law.
- Apply the applicable rate to the gross payment.
- Check the relevant double-tax treaty for any reduction or exemption.
- Withhold the tax at the time of payment and file the monthly WHT return on the ZATCA portal.
- Issue a WHT certificate to the non-resident counterparty.
Saudi Context
Standard WHT rates are 5% on dividends and rent; 15% on royalties; 20% on management fees; and other rates by payment type. ZATCA enforces strict filing deadlines, and late filing incurs penalties under the Income Tax Implementing Regulations.
Example
A Saudi company pays a UK consultant SAR 500,000 for management services with no applicable treaty reduction. WHT = 20% × 500,000 = SAR 100,000 withheld and remitted to ZATCA in the monthly return.