![\"\"](\"https:\/\/www.creationbc.com\/wp-content\/uploads\/2019\/11\/download.png\" "\\"\\"")
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This Article was researched and written on Sep 27th, 2022 by Steven Ireland.<\/p>\n<\/div>\n<\/div>\n
Withholding tax in Saudi Arabia<\/a> (\u201cWHT\u201d) is defined as a specific percentage of income earned by a non-resident entity in Saudi Arabia, providing services within Saudi Arabia and generating sources of income. The withholding person must keep records proving its compliance with the withholding provisions if they have at least the name and address of their beneficiaries, the type of payment, the amount, and the amount deducted in addition to any supporting documents for at least ten (10) years after payment.<\/p>\n <\/p>\n Under Article 63 of the ITL, a non-resident entity with no Permanent Establishment (\u201cPE\u201d) in Saudi Arabia is subject to Withholding Tax at the following rates, unless the rate is reduced under a tax 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A penalty of 1% of the unpaid tax for every thirty (30) days of delay from the due date shall be imposed for non-payment of Withholding Tax. An additional penalty of 25% may be levied to the unpaid tax in case Zakat, Tax and Customs Authority (\u201cZATCA\u201d) suspects tax evasion.<\/p>\n <\/p>\n The withholding person must submit a monthly Withholding Tax return within the first ten (10) days of the month following the month during which payment to the non-resident party was made. <\/p>\n The purpose of double tax treaties is to eliminate double taxation on cross-border transactions by granting taxing rights to only one country or providing for an exemption or credit system. It also provides tax relief in the form of reduced rates of withholding tax on some cross-border transactions. Saudi Arabia is a party to several tax treaties with other countries, one of which is with the UAE. The Double Tax Treaty (\u201cDTT\u201d) between Saudi Arabia and the UAE was effective from 1 January 2020. A summary of the key features of the DTT is outlined below:<\/strong><\/p>\n <\/p>\n We have seen in practice that many non-resident service providers are not considering the impact of withholding tax when negotiating their contracts with clients in Saudi Arabia. As a result, they end up suffering a loss of up to 20% due to the financial impact of withholding tax not being priced in into the contract value. The contract should contain a gross-up clause whereby the value agreed with their Saudi Arabia customer is net of withholding tax and the applicable rate is agreed by both parties (subject to commercial considerations).<\/p>\n For more information regarding how Creation can assist with tax services, contact our tax team at tax@creationbc.com<\/a>\u00a0or call our Dubai office\u00a0+971 4 878 6240<\/a> Riyadh office +966 54 511 2494<\/a>\u00a0to arrange your expert consultation.[\/vc_column_text][vc_empty_space][\/vc_column][\/vc_row][vc_row][vc_column width=”1\/5″][vc_single_image image=”12267″ alignment=”center” style=”vc_box_circle_2″ onclick=”custom_link” link=”https:\/\/www.creationbc.com\/en-sa\/scott-cairns\/”][\/vc_column][vc_column width=”1\/5″][vc_column_text]Scott Cairns<\/a>, <\/strong>
\nNon-resident entities deriving Saudi Arabia -sourced income whether they deal with governmental, non-governmental, or semi-governmental establishments are all subject to Withholding Tax.
\nAccording to the Implementing Regulations of the Income Tax Law (\u201cITL\u201d), Withholding Tax shall be imposed on the total amount paid to the non-resident entity, notwithstanding expenses incurred to make the income; full allowances\/disallowances, as a deduction, of such payment.[\/vc_column_text][vc_btn title=”BOOK A FREE CONSULTATION” style=”3d” align=”center” i_align=”right” i_type=”typicons” i_icon_typicons=”typcn typcn-chevron-right” add_icon=”true” link=”url:%2Fen-sa%2Fcontact-us%2F”][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\nWITHHOLDING TAXES IN SAUDI ARABIA<\/span><\/h2>\n
WHAT ARE THE WITHHOLDING TAX RATES IN SAUDI ARABIA?<\/span><\/h2>\n
WHAT ARE THE WITHHOLDING TAX PENALTIES IN SAUDI ARABIA?<\/span><\/h2>\n
WHEN ARE THE WITHHOLDING TAX DEADLINES?<\/span><\/h2>\n
\nAs confirmed by ZATCA, the withholding person is the entity residing in KSA and is required to file the Withholding Tax return through its ZATCA portal.
\nAn annual Withholding Tax return is also required to be filed within 120 days of the year end, and not later than 60 days of year end for partnerships.<\/p>\nWHAT ARE THE DOUBLE TAX TREATIES WITH SAUDI ARABIA?<\/span><\/h2>\n
\nSaudi Arabia has an extensive network of double tax treaties:[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_single_image image=”9145″ img_size=”full” alignment=”center” onclick=”link_image”][vc_empty_space height=”15px”][vc_single_image image=”9143″ img_size=”full” alignment=”center” onclick=”link_image”][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]<\/p>\nWHAT IS THE TAX TREATY BETWEEN SAUDI ARABIA & THE UNITED ARAB EMIRATES (UAE)?<\/span><\/h2>\n
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TAKEAWAY<\/span><\/h2>\n
\nManaging Director<\/strong><\/p>\n