Tax & ZakatWithholding Tax
Synonyms: WHT، Tax Withheld at Source، Source Deduction Tax
Last updated: 2026-09-25
Short Definition
Withholding tax (WHT) is a tax that a resident payer in Saudi Arabia, or the permanent establishment of a non-resident, deducts from amounts paid from a Saudi source to a non-resident that has no permanent establishment in the Kingdom, and then remits to the Zakat, Tax and Customs Authority (ZATCA) on the recipient's behalf.
Overview
Withholding tax (WHT) is a tax that a resident payer in Saudi Arabia, or the permanent establishment of a non-resident, deducts from amounts paid from a Saudi source to a non-resident that has no permanent establishment in the Kingdom, and then remits to the Zakat, Tax and Customs Authority (ZATCA) on the recipient's behalf. It is not an extra cost for the payer but a way of collecting the non-resident's income tax at source.
Article 68 of the Income Tax Law sets the core rates: 5% on rent, 15% on royalties, 20% on management fees, and 5% on air tickets, air and sea freight and international telecommunications; the Implementing Regulations set rates for other payments not exceeding 15%, including 5% on dividends, loan returns and technical and consulting services. The payer must register with ZATCA, remit the withheld amount within the first ten days of the month following payment, and give the recipient a certificate of the tax withheld. A payer who fails to do so becomes personally liable for the tax and for a delay fine of 1% of the unpaid tax for every 30 days.
In real estate, WHT arises when a resident company or establishment pays rent to a non-resident owner, property management fees to a foreign company, or design and engineering consultancy fees to an overseas firm with no permanent establishment. It does not apply to payments to landlords or brokers resident in Saudi Arabia, and where the payer is an individual the obligation covers only payments related to their business activity. Some rates may be reduced under double tax treaties, and qualifying regional headquarters enjoy a 0% rate on specified payments for a renewable 30-year period.
⚖️ Legal Basis
Withholding tax is based on Article 68 of the Income Tax Law issued by Royal Decree No. (M/1) dated 15/1/1425H and Article 63 of its Implementing Regulations issued by Ministerial Resolution No. (1535) dated 11/6/1425H, as amended; ZATCA applies a delay fine of 1% of the unpaid tax for every 30 days. The incentives approved by Royal Decree No. (M/62) dated 28/4/1445H grant qualifying regional headquarters a 0% withholding rate on dividends, payments to related parties and specified services for 30 years.
💡 Practical Example
A Riyadh retailer leases a warehouse owned by a non-resident investor with no permanent establishment in the Kingdom, at SAR 240,000 a year paid in four quarterly instalments of SAR 60,000. When paying the January instalment, the company withholds 5% (SAR 3,000), transfers SAR 57,000 to the owner, files its monthly WHT return, remits SAR 3,000 to ZATCA by 10 February and gives the owner a withholding certificate. In the same month it pays SAR 100,000 in management fees to its overseas parent and withholds 20% (SAR 20,000), so it remits SAR 23,000 in total for January. Had it failed to withhold, the company would be personally liable for the tax plus a delay fine of 1% for every 30 days. The VAT treatment of the rent is a separate question to be assessed on its own.
⚠️ Common Mistakes
- ✗Withholding 5% from rent paid to a landlord resident in Saudi Arabia, when WHT applies only to payments to non-residents.
- ✗Applying 5% to every payment abroad, when management fees are subject to 20% and royalties to 15%.
- ✗Deducting the tax from the recipient but not remitting it to ZATCA within the first ten days of the following month, which makes the payer personally liable plus delay fines.
- ✗Applying a reduced treaty rate without complete recipient details and documents such as a tax residency certificate.
- ✗Failing to give the recipient a withholding certificate or to file the year-end recipient information with ZATCA.
🌍 International Differences
Most countries levy withholding tax on payments to non-residents and reduce it through double tax treaties. In the UAE, the withholding rate is currently 0% under the corporate tax law. Turkey applies withholding (stopaj) widely, including 20% on rent paid by businesses to individual landlords. Egypt applies withholding to a range of payments to non-residents at rates set by its income tax law. Saudi Arabia is distinctive for statutory rates fixed by payment type and for placing clear personal liability on the payer for withholding and remitting the tax.
FAQs
What is the withholding tax rate on rent paid to a non-resident in Saudi Arabia?▾
The rate is 5% of the rent under Article 68 of the Income Tax Law. The resident payer or permanent establishment withholds it and remits it to ZATCA on behalf of the non-resident owner.
When must withholding tax be remitted to ZATCA?▾
Within the first ten days of the month following the month in which the payment was made, together with the monthly WHT return on the ZATCA portal. Late payment attracts a fine of 1% of the unpaid tax for every 30 days.
Who bears the tax if it was not withheld?▾
The payer becomes personally liable for tax that was not withheld or not remitted, plus delay fines. The non-resident recipient also remains liable to ZATCA, which may collect the tax from them or their agent.
Do double tax treaties reduce Saudi withholding tax?▾
Treaties may reduce WHT on dividends, interest and royalties, and ZATCA allows the reduced rate to be applied at payment when full recipient details and documents are provided. For real estate income, treaties generally leave the taxing right with the country where the property is located.
Must an individual withhold tax from rent for their own home paid to a non-resident?▾
An individual's withholding obligation covers only payments related to their business activity, so rent an individual pays for their own home is normally outside it. Companies and establishments must withhold on rent they pay to a non-resident.
