Withholding tax

Meaning

Withholding tax (ضريبة الاستقطاع) is income tax collected at source: when a business in the Kingdom pays a non-resident for something earned here, it deducts a percentage and pays it to ZATCA on the non-resident's behalf. The rates in the Income Tax Law and its regulations depend on the payment: five percent on rent, dividends, interest and technical or consulting services; fifteen percent on royalties and most other services; twenty percent on management fees. A tax treaty with the payee's country may lower the rate, with the treaty residency certificate on file.

The payer files a monthly withholding return and pays the tax within ten days of the end of the month of payment, and an annual return after the year. Failing to withhold makes the payer liable for the tax itself.

Also called: WHT · ضريبة الاستقطاع · tax withheld at source

Example

A Riyadh firm pays a Dubai consultancy SAR 100,000 for a market study. It withholds five percent, pays the consultancy 95,000, remits 5,000 to ZATCA by the tenth of the next month with the withholding return, and gives the consultancy a certificate of the tax withheld.