Many establishments resident in Saudi Arabia often seek services from companies or individuals outside the Kingdom, whether these services are consultancy, technical, or engineering. When these services are requested from non-residents, they may be subject to withholding tax by the Zakat, Tax, and Customs Authority.
Withholding tax, also known as retention tax, is a direct tax determined at certain rates and applied to non-residents in Saudi Arabia. It is deducted from amounts they receive from a source within the Kingdom. Withholding tax rates in Saudi Arabia range between 5 and 20 percent.
Who is responsible for withholding tax?
The person responsible is defined as any individual residing in Saudi Arabia, whether taxable or non-taxable, or a permanent establishment for non-residents who pays amounts from sources within the Kingdom to non-residents. Thus, they are responsible for remitting the withholding tax amount to the authority.
As for the resident natural person, they are only obligated to withhold tax in cases where they pay an amount from a source within the Kingdom for services provided by a non-resident for the purposes of their economic activity.