What is Withholding Tax?
Withholding tax (WHT) is a tax deducted at source by the payer from amounts paid to non-resident recipients. In Saudi Arabia, ZATCA requires resident entities and permanent establishments to withhold tax on cross-border payments to non-residents for services, royalties, dividends, interest, and other defined categories.
How It Works
- Identify whether the recipient is a non-resident and the nature of the payment.
- Apply the relevant ZATCA WHT rate (5% rent, 5% dividends, 5% interest, 15% royalty, 5-20% services).
- Withhold the tax from the gross amount payable.
- Remit the tax to ZATCA within 10 days of the end of the month of payment.
- File monthly and annual WHT returns; apply tax treaty rates where applicable with proper documentation.
Saudi Context
WHT rates per the Saudi Income Tax Law: rent 5%, dividends 5%, interest 5%, royalties 15%, technical services 5%, management fees 20%. Saudi Arabia’s double tax treaties may reduce these rates with valid tax residency certificates. Late payment carries a penalty of 1% of unpaid tax per 30 days of delay.
Example
A Saudi company pays a foreign consultant USD 100,000 (approx SAR 375,000) for technical services. WHT at 5% = SAR 18,750. The company pays the consultant SAR 356,250 net and remits SAR 18,750 to ZATCA within 10 days of month-end, then files the monthly WHT return through ZATCA’s portal. To run the numbers for any payment type, use the withholding tax calculator.