1. Types of Payments

Withholding tax applies to specific types of payments, including dividends, interest, royalties, and payments for technical services made by residents of Saudi Arabia to non-residents.

2. Rates

The withholding tax rates vary depending on the type of payment and the residency status of the recipient. For example, the withholding tax rate on dividends paid to non-residents is 5%, while the rate on interest, royalties, and technical service fees is 15%.

3. Withholding Agent

The withholding tax is typically withheld by the payer of the income, who acts as the withholding agent. The withholding agent is responsible for deducting the tax from the payment and remitting it to the tax authorities.

4. Tax Treaty Relief

Saudi Arabia has entered into tax treaties with several countries to prevent double taxation and provide relief from withholding tax. Tax treaties may reduce or eliminate the withholding tax rate applicable to certain types of payments.

5. Compliance

Businesses in Saudi Arabia must comply with the withholding tax requirements, including registering as withholding agents, withholding the tax from payments to non-residents, and remitting the tax to the tax authorities on time.

6. Reporting

Withholding agents are required to file withholding tax returns and provide statements to the tax authorities detailing the payments made and the tax withheld.

7. Penalties

Failure to comply with withholding tax requirements may result in penalties, including fines and interest on unpaid taxes.