Withholding tax in Saudi Arabia is deducted by a resident payer from amounts paid to a non-resident for services, royalties, rent, dividends and similar payments, and paid to ZATCA on the beneficiary's behalf. Choose the payment type and enter the amount, and the withholding tax calculator shows the tax, the net transfer and the date the tax is due. If your contract promises the beneficiary a fixed net amount, switch on advanced mode to gross it up and see the tax your business absorbs.
How to calculate withholding tax
The tax applies to the full amount paid to the non-resident, not to their profit. When the agreed figure is the gross, the tax is a percentage of it and the remainder is transferred. When the agreed figure is a net amount the beneficiary must receive in full, the gross is the net divided by (1 − rate), and the difference is tax your business pays on top.
Tax = Gross × r · Net = Gross − Tax · Gross = Net ÷ (1 − r)
Withholding tax rates in Saudi Arabia by payment type
The rates below come from ZATCA's General Guideline for Withholding Tax, issued under the Income Tax Law and its Implementing Regulations:
| Payment to a non-resident | Rate |
|---|---|
| Management fees | 20% |
| Royalties (rights of ownership and use) | 15% |
| Domestic land transport | 15% |
| Any other payments | 15% |
| Dividends | 5% |
| Rent | 5% |
| Loan charges | 5% |
| Insurance and reinsurance premiums | 5% |
| Technical and consulting services | 5% |
| Air or sea freight and air tickets | 5% |
| International telecom services | 5% |
The guideline carves out some telecom payments, such as charges for using the local network to carry international calls and international roaming. If your payment does not clearly match a row, the fallback is the 15% rate for "any other payments"; check the current guideline with ZATCA before you settle on a classification.
Who pays withholding tax and when
The resident business making the payment is responsible for deducting the tax and paying it to ZATCA, even though the economic burden falls on the beneficiary. The tax is paid and the monthly withholding return filed within the first 10 days of the month after the payment: a royalty paid in January is due by 10 February. Late payment exposes the payer to penalties set by the law, so put the tenth of every month in the finance team's calendar.
Withholding tax and double tax treaties
If the beneficiary is resident in a country that has a double tax treaty with Saudi Arabia, the treaty may lower the rate or exempt the payment, provided conditions are met, including proof of the beneficiary's tax residence. ZATCA has issued a circular on applying withholding tax under treaties. In the calculator, enter the reduced rate in the "Applied rate" field in advanced mode, and only after you have collected the supporting documents.
Common mistakes
- Calculating the tax on the net transfer instead of the gross, which understates it.
- Agreeing a net amount for the beneficiary, then deducting the rate from it: they receive less than agreed and the tax is still short.
- Booking management fees from the parent company as consulting services at 5% instead of 20%.
- Forgetting to withhold on software subscriptions and licence fees because they were paid on the company card.
- Applying a reduced treaty rate without a tax residence certificate from the beneficiary.
What to do with the result
Transfer the net to the beneficiary and book the tax to a withholding tax payable account until you pay it before the date shown in the result. Download the PDF to attach to the payment voucher, or the Excel file, whose cells hold live formulas, if you want to work out the whole month's foreign payments in one sheet. Tell the beneficiary how much was withheld so they can claim it at home if they are entitled to.
When foreign payments repeat every month
A business that pays a software vendor, a consultant and a parent company abroad repeats the same calculation every month, then rolls it into one return before the tenth. Microtec ERP, our accounting software, puts these vendor bills and payments in the same place as sales, purchasing, inventory and finance, so the month's foreign payments are easy to pull together. Test it on one month of payments.