Tax & ZakatNon-Resident Investor
Synonyms: Non-Resident، Foreign Non-Resident Investor، Offshore Investor
Last updated: 2026-10-05
Short Definition
A non-resident investor is an individual or entity that is not resident in Saudi Arabia for tax purposes but earns income from a Saudi source, such as property rent, dividends or sale gains, or owns real estate there.
Overview
A non-resident investor is an individual or entity that is not resident in Saudi Arabia for tax purposes but earns income from a Saudi source, such as property rent, dividends or sale gains, or owns real estate there. An individual is resident if they have a permanent home in the Kingdom and stay at least 30 days in the tax year, or stay at least 183 days; a company is resident if formed under the Companies Law or if its central management is in the Kingdom. So 'non-resident' for tax differs from 'non-Saudi' under the ownership laws: a foreigner living in the Kingdom is not a non-resident for tax.
The Income Tax Law treats income from real property located in the Kingdom, including rent and gains from disposing of it or of shares in a company whose assets consist mainly of Saudi real property, as Saudi-source income. Every resident, whether or not a taxpayer, and every permanent establishment of a non-resident, must withhold tax on Saudi-source payments to a non-resident and remit it within the first ten days of the following month: 5% on rent, 5% on dividends and interest, 15% on royalties and 20% on management fees. A natural-person payer withholds only on payments related to their business activity. A non-resident operating through a permanent establishment in the Kingdom pays 20% income tax on its tax base. Double taxation agreements may reduce some of these rates under their conditions.
On property, a purchase is subject to the 5% Real Estate Transaction Tax, for which the seller remains liable to ZATCA even if the parties agree the buyer will bear it, and the Law of Real Estate Ownership by Non-Saudis, in force since January 2026, adds a fee of up to 5% of the value of a non-Saudi's transaction, which the implementing regulation (published 3 July 2026) set at 2% in Riyadh city, Makkah city, Madinah city and Jeddah Governorate and 0% elsewhere. A non-resident non-Saudi may own within the geographic zones set by the Council of Ministers, and ownership is complete only once registered in the real estate register. If the property is let commercially, VAT obligations must be checked, since a non-resident obliged to pay tax must register within 30 days of its first supply, with no minimum threshold.
⚖️ Legal Basis
Income Tax Law issued by Royal Decree No. (M/1) dated 15/1/1425H: Article 3 (residency), Article 5 (income from real property in the Kingdom is Saudi-source income), Article 7 (20% rate) and Article 68 (withholding: 5% on rent, 15% on royalties, 20% on management fees, remitted within the first ten days of the following month). Law of Real Estate Ownership by Non-Saudis issued by Royal Decree No. (M/14) dated 19/1/1447H (fee of up to 5%, set by its implementing regulation at 2% in Riyadh city, Makkah city, Madinah city and Jeddah Governorate and 0% elsewhere). Real Estate Transaction Tax Law issued by Royal Decree No. (M/84) dated 19/3/1446H.
💡 Practical Example
A foreign investor living outside the Kingdom owns an office in a permitted zone in Riyadh and leases it to a Saudi company for SAR 240,000 a year, paid quarterly (SAR 60,000 per instalment). On each payment the tenant company withholds 5% (SAR 3,000) and remits it to ZATCA within the first ten days of the following month, so the investor receives SAR 57,000, and total withholding for the year is SAR 12,000. The company gives her a certificate of the tax withheld. Had it failed to withhold, the company would become personally liable for the tax and late-payment fines. If she later sells the office for SAR 3,000,000, Real Estate Transaction Tax of SAR 150,000 is due, and as the seller she is liable for it to ZATCA.
⚠️ Common Mistakes
- ✗Confusing 'non-resident' for tax with 'non-Saudi' — a foreigner living in the Kingdom is not a tax non-resident; residency is tested by a permanent home plus 30 days, or by 183 days.
- ✗A tenant business failing to withhold 5% from rent paid to a non-resident landlord — the payer becomes personally liable for the tax and the late-payment fine of 1% per 30 days.
- ✗Assuming a sale of Saudi property, or of shares in a Saudi property company, has no income tax impact — the law treats such gains as Saudi-source income.
- ✗Ignoring the non-Saudi transaction fee (capped by law at 5%; set by the regulation at 2% in Riyadh city, Makkah city, Madinah city and Jeddah Governorate and 0% elsewhere) in a purchase feasibility study, on top of the Real Estate Transaction Tax.
- ✗Applying a reduced treaty rate without meeting its conditions and documentation, such as a tax residency certificate.
🌍 International Differences
Many countries tax non-residents on income from property located there, through withholding on rent or tax on sale gains, reduced under tax treaties. The UAE has no personal income tax and generally no withholding on individuals' rent, though registration fees apply on purchase. In Turkey, non-residents are subject to income tax on rent from Turkish property, with withholding on rent paid by businesses. The Saudi regime features a flat 5% withholding on rent, treats gains on shares in property-rich companies as Saudi-source income, and adds a separate ownership fee for non-Saudis, capped by law at 5% and set by the regulation at 2% in Riyadh city, Makkah city, Madinah city and Jeddah Governorate and 0% elsewhere, on top of the Real Estate Transaction Tax.
FAQs
Who is a non-resident investor for Saudi tax purposes?▾
Anyone who does not meet the residency tests: an individual is resident with a permanent home and at least 30 days' stay in the year, or 183 days' stay; a company is resident if formed under the Companies Law or managed centrally from the Kingdom.
What withholding tax applies to rent paid to a non-resident owner?▾
5% of the rent, withheld by the resident payer or permanent establishment and remitted to ZATCA within the first ten days of the month after payment; a double taxation agreement may reduce it under its conditions.
Must an individual renting a home from a non-resident owner withhold tax?▾
A natural person withholds only on payments related to their business activity under Article 68 of the Income Tax Law, so rent for a personal home is not covered, unlike payments by companies and establishments.
Can a non-resident own real estate in Saudi Arabia?▾
Yes, under the Law of Real Estate Ownership by Non-Saudis in force since January 2026, within the geographic zones and with the rights and ownership limits set by the Council of Ministers, subject to a fee capped by law at 5% of the transaction value (set by the implementing regulation at 2% in Riyadh city, Makkah city, Madinah city and Jeddah Governorate and 0% elsewhere) and registration in the real estate register.
Are gains on selling Saudi property taxable if the seller is non-resident?▾
The Income Tax Law treats gains from disposing of real property in the Kingdom, or of shares in a company whose assets are mainly Saudi real property, as Saudi-source income; treatment varies by case and treaty, so it should be checked before the sale.
