Withholding Tax in Saudi Arabia: Rates and Deadlines | Hespah LLC [Skip to main content](#main-content)[![Hespah LLC](https://centralcdn.hespah.com/home_logolight_file2png.webp)](/en)Search More [Home](/en) [Learning Hub](/en/courses) [About us](https://hespah.com/who-we-are) [Blog](/en/blog) [Contact Us](/en/contact) Login[New Account](/en/register) 1. [Home](/en) / 2. [Blog](/en/blog) / 3. Withholding Tax in Saudi Arabia: Who It Applies To and How It's Calculated Withholding Tax in Saudi Arabia: Who It Applies To and How It's Calculated ========================================================================== 2026-09-21 / 1 month ago A Saudi company hires a foreign consultant to design an operating system and pays the fee from a bank account in Riyadh. The consultant is not a resident of the Kingdom and has no branch or office there — yet the company must still withhold part of the payment before transferring it. That deduction is **withholding tax**, an obligation that falls on the paying entity, not on the foreign beneficiary. Anyone paying a non-resident for a service, rent, or profit distribution needs to know when this tax applies and at what rate, because getting it wrong produces a recurring monthly penalty, not a one-time fine. ![Withholding tax example: a 100,000 SAR technical-service payment to a non-resident, 5% (5,000 SAR) withheld for ZATCA; 15% if paid to the head office](https://centralcdn.hespah.com/uploads/emils/17908073080.jpeg "Withholding tax example: a 100,000 SAR technical-service payment to a non-resident, 5% (5,000 SAR) withheld for ZATCA; 15% if paid to the head office") Who is subject to withholding tax? ---------------------------------- Withholding tax applies to any amount a non-resident receives from a source inside the Kingdom, whether the recipient is an individual or a company, as long as it has no permanent establishment there. The paying entity in Saudi Arabia deducts the tax from the gross payment and remits it to the Zakat, Tax and Customs Authority, under Article 68 of the Income Tax Law and Article 63 of its Implementing Regulations. It makes no difference whether the beneficiary is a global corporation or an independent freelancer; what matters is where they are resident, not the size of their business. If a non-resident does have a permanent establishment in the Kingdom, its income falls under ordinary income tax rules instead, not withholding tax. So the first question any paying entity should ask before transferring funds is simple: does the beneficiary have a lasting presence in Saudi Arabia or not? Withholding tax rates in Saudi Arabia ------------------------------------- Article 63 of the Implementing Regulations sets four categories of payments subject to withholding, each with its own rate depending on the nature of the payment and the recipient. The table below summarizes them: Payment type Rate Management fees (e.g. hotel or ship management contracts) 20% Royalties, or technical/consulting services, or international telecom services paid to a head office or a related company 15% Technical/consulting services or international telecom services (not to a head office or related company), rent, air/sea tickets or freight, dividends, loan interest, insurance or reinsurance premiums 5% Any other payments not listed above 15% Management fees, under the regulations, cover payments for management contracts such as hotel or ship management. Technical and consulting services, meanwhile, include studies, research, engineering or geological surveys, and supervisory services, regardless of their exact nature. Air ticket and freight payments mean amounts paid inside the Kingdom to air or sea carriers or their agents; they exclude freight paid for goods shipped from abroad to Saudi ports — that is treated entirely differently and falls outside this table. Distributed profits get special treatment: any distribution from a resident company to a non-resident shareholder is subject to withholding, as is any amount transferred from a permanent establishment to a related party. A partial or full liquidation that exceeds paid-up capital counts as a distribution as well. And the fact that the distributing company itself is subject to income tax does not exempt what it distributes to non-residents from withholding — the two taxes are entirely independent of each other. How is withholding tax calculated? ---------------------------------- The calculation itself is simpler than many assume: the rate applies to the gross amount paid to the non-resident, with no deduction for any expense the paying entity incurred to generate that income — even if that expense would otherwise be deductible under the Income Tax Law. In other words, there is no tax base in the usual sense here; the base is the gross payment itself, and the rate is deducted directly before the transfer. A worked example: if a Saudi company pays a non-resident consultant SAR 100,000 for a technical service, and the payment is not directed to the consultant's head office or a related party, withholding applies at 5% of the full amount — SAR 5,000 — remitted to the Authority and deducted from the payment before it reaches the beneficiary. If that same payment were instead directed to the consultant's head office abroad, the rate would rise to 15%, because the regulations explicitly distinguish between the two cases. Duties of the entity required to withhold ----------------------------------------- The paying entity — not the non-resident beneficiary — carries several procedural obligations toward the Authority: 1. Register with the Authority before remitting the first payment subject to withholding, even if the entity has no other tax registration at all. 2. File the monthly withholding statement within the first ten days of the month following the month the payment was made to the beneficiary. 3. Submit an annual information return on withholding operations within 120 days of the fiscal year-end, or within 60 days only if the entity is a partnership (شركة أشخاص). 4. Keep records of every withholding transaction — the beneficiary's name and address, the payment type, its value, and the amount withheld — for no less than ten years after payment. These duties are entirely separate from any other tax registration the paying entity may hold, and they stem from Articles 55 and 63 of the Implementing Regulations. So even a company that files no income tax return at all, for whatever reason, must register for withholding tax the moment it first pays a non-resident. ![Withholding tax obligations: register before the first payment, monthly return within 10 days, annual return within 120 days, keep records for 10 years; rates of 20%, 15% and 5%](https://centralcdn.hespah.com/uploads/emils/17908073081.jpeg "Withholding tax obligations: register before the first payment, monthly return within 10 days, annual return within 120 days, keep records for 10 years; rates of 20%, 15% and 5%") What about double taxation agreements? -------------------------------------- The Kingdom has signed double taxation agreements with a number of countries, and these agreements can set withholding rates lower than the default rates in the Income Tax Law. In practice, though, this does not exempt the paying entity from withholding at the higher statutory rate upfront; the non-resident beneficiary recovers the difference later through a formal refund request, not through a reduced deduction at the time of payment. To request the refund, the paying entity must submit to the Authority a letter from the beneficiary requesting the refund, a tax residency certificate issued by the tax administration of the other country confirming the beneficiary is resident there and that the income is taxable there, plus a copy of the withholding return and proof of payment. Once the Authority verifies the treaty conditions are met, it refunds the amount withheld in excess. Penalties related to withholding tax ------------------------------------ There are two main types of penalties here: one for failing to register on time, and one for delaying payment of tax already withheld. Violation Penalty Natural person fails to register on time SAR 1,000 Joint-stock company fails to register on time SAR 10,000 Other entities fail to register on time SAR 5,000 Late payment of withheld tax past its due date (10 days into the following month) 1% of the unpaid tax for every 30 days of delay Responsibility for the late-payment penalty falls on the withholding agent itself, not the non-resident beneficiary. The Authority has confirmed this rate explicitly in its recurring notices about monthly withholding statement deadlines, which makes it one of the most frequently repeated tax penalties whenever a paying entity keeps missing the deadline month after month without correcting course. For anyone tracking other Saudi tax obligations closely, our articles on [VAT registration](https://hespah.com/en/blog/vat-registration-saudi-arabia) and on [filing the VAT return](https://hespah.com/en/blog/vat-return-filing-saudi-arabia) are worth a look, since every tax obligation in the Kingdom has its own scope and deadlines. Comparing withholding tax with [the difference between zakat and income tax](https://hespah.com/en/blog/zakat-vs-income-tax-saudi) also clarifies the bigger picture of the Saudi tax system, and anyone following the e-invoicing rollout will find useful background in our article on [e-invoicing](https://hespah.com/en/blog/e-invoicing-phase-2-saudi-arabia). [Hespah Academy's courses](https://hespah.com/courses) cover these topics in greater applied depth. Frequently asked questions -------------------------- ### Is withholding tax calculated on the net amount or the gross amount? Always the gross amount. The rate applies to the full sum paid to the non-resident, with no deduction for any expense the paying entity incurred to generate that income. ### Does withholding tax apply to international telecom services? Yes — if the service is provided by a non-resident entity, such as using an international network to connect a call or leasing capacity on an international cable, it is subject to a 5% rate. International roaming charges, however, are not subject to withholding at all, because the service is performed entirely outside the Kingdom and is not considered to arise from a Saudi source. ### Who is responsible for paying withholding tax? The Saudi paying entity, not the non-resident beneficiary. It must deduct the rate before the transfer, register itself with the Authority, and file the monthly statement on time — otherwise it bears the penalty itself, without the foreign beneficiary being affected. ### Does the rate change if there is a double taxation agreement with the beneficiary's country? The treaty rate may be lower, but in practice the tax is withheld first at the higher statutory rate, and the difference is then reclaimed from the Authority after submitting a tax residency certificate and the required documents. Sources ------- - [Implementing Regulations of the Income Tax Law — Zakat, Tax and Customs Authority](https://zatca.gov.sa/en/RulesRegulations/Taxes/Documents/Regulations_of_Income_Tax.pdf) - [ZATCA notice on withholding tax statement deadlines and penalty](https://zatca.gov.sa/en/MediaCenter/News/Pages/Submit-WH-Return-for-Mar-2026.aspx) - [Compiled resolutions and circulars concerning withholding tax](https://zatca.gov.sa/en/RulesRegulations/Taxes/Documents/8.WHT%20CIRCULARS%20AND%20RESOLUTIONS_Withholding%20Eng.pdf) *This article is for informational purposes only and does not replace consulting official sources or a qualified professional before taking any action.* Articles you might like ----------------------- [![Nitaqat Wage Floor Rises to SAR 5,000 Then SAR 6,000](https://centralcdn.hespah.com/265/conversions/cover-sm.webp)2026-10-26 ### Nitaqat Wage Floor Rises to SAR 5,000 Then SAR 6,000 The Nitaqat wage floor rises to SAR 5,000 after six months and SAR 6,000 after twelve, by royal directive of 25 October](/en/blog/nitaqat-wage-floor-2026)[![UAE e-Invoicing: the Provider Deadline Falls on 30 October](https://centralcdn.hespah.com/263/conversions/cover-sm.webp)2026-10-26 ### UAE e-Invoicing: the Provider Deadline Falls on 30 October E-invoicing in the UAE: appoint an accredited service provider by 30 October 2026 if revenues reach AED 50 million; go l](/en/blog/uae-einvoicing-asp-deadline)[![Reclaiming VAT on Real Estate Supplies: a 30-Day Window](https://centralcdn.hespah.com/181/conversions/cover-sm.webp)2026-10-14 ### Reclaiming VAT on Real Estate Supplies: a 30-Day Window ZATCA Board Resolution 10-04-26, published 13 October 2026, opens a VAT refund on real estate supplies made by individua](/en/blog/vat-real-estate-supplies-refund)[![ZATCA Objection: The Full Appeal Path, Step by Step](https://centralcdn.hespah.com/138/conversions/cover-sm.webp)2026-10-06 ### ZATCA Objection: The Full Appeal Path, Step by Step A ZATCA objection runs on deadlines: 60 days to file a grievance, 90 for ZATCA to rule, 30 to settle or litigate. 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