Saudi Arabia

Payments made from a resident party or a PE to a non-resident party for services performed are subject to WHT. The rates vary between 5%, 15%, and 20% based on the type of service. 

The WHT should be paid within the first ten days of the month following the month during which the payment was made.

The domestic rate for WHT is 5% on dividends, 5% on interest, and 15% on royalties.

Tax treaties

Saudi Arabia has entered into tax treaties with several countries. Treaties currently or about to be effective are listed below. 

DTTs have not yet been effectively tested in Saudi Arabia. However, they generally follow the OECD Model Treaty and may provide certain relief, including WHT on dividends, interest, and royalties.

The following are the treaty WHT rates for payments made from Saudi Arabia to treaty country recipients. Each tax treaty should be studied carefully because there could be exceptions to the general rules.

Notes

1. Shall not exceed:
   • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that has owned, directly or indirectly, at least 25% of the capital of the company paying the dividends for a period of at least 12 months preceding the date the dividends were declared.
   • 10% of the gross amount of the dividends in all other cases.
2. Shall not exceed:
   • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends.
   • 10% of the gross amount of the dividends in all other cases.
3. Shall not exceed:
   • 5% of the gross amount of dividends if the beneficial owner is (i) a company or (ii) an entity wholly owned by the government.
   • 10% of the gross amount of the dividends in all other cases.
4. Shall not exceed:
   • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends.
   • 10% of the gross amount of the dividends in all other cases.
5. Shall not exceed:
   • 5% of the gross amount of the dividends.
   • The contracting state of which the company paying the dividends is a resident shall exempt from tax the dividends paid by that company to a company (other than a partnership) that is a resident of the other contracting state, as long as it directly holds at least 25% of the capital of the company paying the dividends.
6. Shall not exceed:
   • 5% of the gross amount of the dividends:
     • if the beneficial owner is a company (other than a partnership) that directly holds at least 20% of the capital of the company paying the dividends or
     • if the beneficial owner is central bank or an entity that is wholly owned by the government.
   • 10% of the gross amount of the dividends in all other cases.
7. Shall not exceed:
   • 15% of the gross amount of the dividends where qualifying dividends are paid by a property investment vehicle.
   • 5% of the gross amount of the dividends in all other cases.
8. Shall not exceed:
   • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 50% of the capital of the company paying the dividends, or has invested 20 million United States dollars (USD) or more, or any equivalent currency, in the capital of the company paying the dividends.
   • 12.5% of the gross amount of the dividends in all other cases.
9. Shall not exceed:
   • 5% of the gross amount of the dividends if the beneficial owner is a company that holds, directly or indirectly, during the period of 183 days ending on the date on which entitlement to the dividends is determined, at least 10% of the voting shares or of the total issued shares of the company paying the dividends.
   • 10% of the gross amount of the dividends in all other cases.
10. Shall not exceed:
    • 5% of the gross amount of the royalties that are paid for the use of, or the right to use, industrial, commercial, or scientific equipment.
    • 10% of the gross amount of the royalties in all other cases.
11. Shall not exceed:
    • 5% of the gross amount of the royalties that are paid for the use of, or the right to use, industrial, commercial, or scientific equipment.
    • 8% of the gross amount of the royalties in all other cases.
12. Shall not exceed:
    • 7.5% of the gross amount of such royalties that are paid for rendering of any services or assistance of a technical or managerial nature.
    • 10% of the gross amount of such royalties in all other cases.
13. Shall not exceed:
    • 5% of the gross amount of the dividends.
    • The contracting state of which the company paying the dividends is a resident shall exempt from tax the dividends paid by that company to a company (other than a partnership) that is a resident of the other contracting state, as long as it directly holds at least 25% of the capital of the company paying the dividends or when paid to the government, the central bank, or any institution, agency, or fund wholly owned by the government of Ireland.
14. Shall not exceed:
    • 5% of the gross amount of the royalties that are paid for the use of, or the right to use, industrial, commercial, or scientific equipment.
    • 7% of the gross amount of the royalties in all other cases.
15. Shall not exceed:
    • 5% of the gross amount of the dividends if the beneficial owner directly holds at least 20% of the capital of the company paying the dividends.
    • 15% of the gross amount of the dividends in all other cases.
16. Shall not exceed:
    • 2.5% of the gross amount of income from debt-claims for banking institutions.
    • 5% of the gross amount of income from debt-claims in all other cases.
17. ZATCA informed a taxpayer in a case where a royalty was paid by a Saudi company to an unrelated, third party that it was also taxable in Saudi Arabia, and requested settlement of 15% WHT, indicating that Saudi Arabia has the taxing right. However, ZATCA recently agreed to provide WHT relief under the treaty provisions.
18. Shall not exceed:
    • 5% of the gross amount of dividends if the beneficial owner is the government of the other contracting state, the central bank of that other contracting state, or any entity wholly owned by the government of that other contracting state.
    • 5% of the gross amount of dividends if the beneficial owner of dividends has invested to the capital of the company paying the dividends at least USD 300,000 or its equivalent in any other currency.
    • 7% of the gross amount of dividends in all other cases.
19. Shall not exceed:
    • 0% if income from debt-claims arising in a contracting state and paid to the government or the central bank of the other contracting state or any entity wholly owned by the government of that other contracting state or under a loan agreement approved by the government shall be exempt from tax in the first-mentioned contracting state.
    • 7% of the gross amount of income from debt-claims in all other cases.
20. Shall not exceed:
    • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends or if beneficial owner is:
      • in the case of Saudi Arabia, the state, a political or administrative subdivision, or a local authority thereof (including The Saudi Arabian Monetary Agency) and wholly owned state entities and
      • in the case of Portugal, the state, a political or administrative subdivision, or a local authority thereof, or the Central Bank of Portugal.
    • 10% of the gross amount of the dividends in all other cases.
21. Shall be taxed only in the contracting state of which recipient is a resident if such income is paid to and beneficially owned by:
    • in the case of Saudi Arabia, the state, a political or administrative subdivision, or a local authority thereof (including The Saudi Arabian Monetary Agency) and wholly owned state entities and
    • in the case of Portugal, the state, a political or administrative subdivision, or a local authority thereof, or the Central Bank of Portugal.
22. Income from debt-claim arising in a contracting state shall be exempted from tax in that contracting state if the payer/beneficial owner of such income is the government of the other contracting state, an administrative subdivision or a local authority, or the central bank or any other financial institution wholly owned by the government of that other state.
23. Shall not exceed:
    • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly holds at least 20% of the capital of the company paying the dividends.
    • 10% of the gross amount of the dividends in all other cases.
24. Income from debt-claim arising in a contracting state shall be exempted from tax in that contracting state if the payer/beneficial owner of such income is the government of the other contracting state.
25. Shall not exceed:
    • 5% of the gross amount of the dividends.
    • The contracting state of which the company paying the dividends is a resident shall exempt from tax the dividends paid by that company to a company (other than a partnership) that is a resident of the other contracting state, as long as it directly or indirectly holds at least 25% of the capital of the company paying the dividends.
26. Shall not exceed:
    • 5% of the gross amount of the dividends.
    • Dividends paid by a company that is a resident of a contracting state to the government of the other contracting state shall be taxable only in that other contracting state.
27. Shall not exceed:
    • 5% of the gross amount of the income from debt-claims.
    • Income from debt-claims arising in a contracting state and paid to the government of the other contracting state shall be taxable only in that other contracting state.
28. Shall not exceed:
    • 5% of the gross amount of the income from debt-claims paid to financial entities or pensions funds.
    • 10% of the gross amount of the income from debt-claims in all other cases.  
29. Income from debt-claims arising in a contracting state shall be taxable only in the other contracting state if: 
    • the income from debt-claims is beneficially owned by the government of that other contracting state, an administrative subdivision or local authority thereof, or the central bank of that other contracting state or any institution wholly owned by that government, or
    • the income from debt-claims is beneficially owned by a resident of that other contracting state with respect to debt-claims guaranteed, insured, or indirectly financed by the government of that other contracting state, an administrative subdivision or local authority' thereof, or the central bank of that other contracting state or any institution wholly owned by that government.
30. Dividends may also be taxed in the contracting state of which the company paying the dividends is a resident and according to the laws of that state; however, if the beneficial owner of the dividends is a resident of the other contracting state, the tax so charged shall not exceed:
    • 5% of the gross amount of the dividends if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends
    • 5% on the gross amount of dividends paid by a company that is a resident of a contracting state if the beneficial owner of the dividends is the central bank of the other contracting state or an institution or fund wholly owned by the other contracting state or a pension scheme that is a resident of that other state, or
    • 15% of the gross amount of the dividends in all other cases.
31. Income from debt-claims arising in a contracting state and paid to a resident of the other contracting state who is the beneficial owner thereof shall be taxable only in that other state to the extent that such income from debt-claims is paid: 
    • to the government of the other contracting state, including its administrative subdivisions or local authorities
    • to the central bank of that other state
    • to a pension scheme of that other contracting state
    • with respect to in indebtedness arising as a consequence of the sale on credit of any equipment, merchandise, or services
    • on any loan of whatever kind granted by a financial institution, or
    • on loans between companies.
32. Income from debt-claims arising in a contracting state shall be exempt from tax in that contracting state if:
    • the payer of such income is the government of that contracting state, an administrative subdivision, a local authority, the central bank, or any other financial institution wholly owned by the government of that state, or 
    • the beneficial owner of such income is the government of the other contracting state, an administrative subdivision, a local authority, the central bank, or any other financial institution wholly owned by the government of that other state.
33. Income from debt-claims arising in a territory shall be exempted from tax in that territory if it is paid:
    • to the central bank of the other territory, or
    • to any financial institution wholly owned or controlled by a public authority of the other territory.
34. Shall not exceed:
    • 4% of the gross amount of such royalties that are paid for the use of, or the right to use, industrial, commercial, or scientific equipment, and
    • 10% of the gross amount of such royalties in all other cases.
35. Dividends paid by a company that is a resident of a contracting state shall not be taxed in that state if the beneficial owner of the dividends is:
    • the government of the other contracting state, including its administrative subdivisions and local authorities
    • the central bank of the other contracting state
    • any financial institution wholly owned by the government of the other contracting state, or
    • a company (other than a partnership) that is a resident of the other contracting state that directly holds at least 25% of the capital of the company paying the dividends.
36. Income from debt-claims arising in a contracting state shall be exempt from tax in that state if such income is derived and beneficially owned by:
    • the government of the other contracting state, including its administrative subdivisions and local authorities
    • the central bank of the other contracting state
    • any financial institution wholly owned by the government of the other contracting state
    • a company (other than a partnership) that is a resident of the other contracting state, or
    • any person that is a resident of the other contracting state with regard to loans guaranteed by the government of either contracting state.
37. Shall not exceed:
    • 5% of the gross amount of the royalties for the use of, or the right to use, industrial, commercial, or scientific equipment, and
    • 7% of the gross amount of the royalties in all other cases.

ZATCA offers a choice of automatic application of relevant tax treaty without going through the refund procedure. The choice is given to Saudi Arabia residents or PEs of non-residents that make payments subject to WHT in Saudi Arabia.

They can apply reduced rates or full relief upon making the payment. The following conditions are imposed on taxpayers that choose to apply DTT automatically:

• Report, via monthly WHT returns, the full details of each payment made to non-resident parties (beneficiaries).
• Still file a request form for application of DTT together with tax residence certificate of the beneficiary.
• Undertake full responsibility for any understatement of tax, including penalties.

As mentioned above, ZATCA provides a choice; taxpayers can still withhold tax and comply with the refund procedure.