The companies located in the special economic zone are exempted from withholding tax provisions during the tax holiday period, subject to certain conditions (see Sec. 10.2.)The withholding tax rates levied on income received/ derived by non-residents from sources within Saudi Arabia, unless reduced by a tax treaty are as given below:
Dividend
Tax is withheld at the rate of 5% from gross dividends distributed to non-residents. However, withholding tax does not apply to distributions made by companies operating in the oil and gas sectors.
Interest
Tax is withheld at the rate of 5% from gross interest paid to non-residents. Interest payments related to bank deposits are exempt from tax. Returns on loans derived from interbank deposits will not be taxed as Saudi-sourced income for non-resident banks under certain conditions, including that the funds remain in the resident bank for no longer than 90 days.
Royalty Copyright
Tax is withheld at the rate of 15% from gross royalties paid to non-residents. The term “royalties” is defined by the regulations as payments made for the use of or the right to use intellectual rights, including but not limited to, copyright, patents, designs, industrial secrets, trade-marks and trade-names, know-how, trade and business secrets, goodwill, payments for information related to industrial, commercial or scientific expertise, or for the rights to exploit natural and mineral resources. They also include payments for the use of or the license to use computer software.
Royalty Patent
Tax is withheld at the rate of 15% from gross royalties paid to non-residents. The term “royalties” is defined by the regulations as payments made for the use of or the right to use intellectual rights, including but not limited to, copyright, patents, designs, industrial secrets, trade-marks and trade-names, know-how, trade and business secrets, goodwill, payments for information related to industrial, commercial or scientific expertise, or for the rights to exploit natural and mineral resources. They also include payments for the use of or the license to use computer software.
Royalty Trademark
Tax is withheld at the rate of 15% from gross royalties paid to non-residents. The term “royalties” is defined by the regulations as payments made for the use of or the right to use intellectual rights, including but not limited to, copyright, patents, designs, industrial secrets, trade-marks and trade-names, know-how, trade and business secrets, goodwill, payments for information related to industrial, commercial or scientific expertise, or for the rights to exploit natural and mineral resources. They also include payments for the use of or the license to use computer software.
Service Management
Tax is withheld at the rate of 20% (15% if services are provided by headquarters or a related entity). The withholding tax also applies to payments for contracts of management of ships, hotels, portfolios, etc while the manager bears no costs.
Service Technical
Tax is withheld at the rate of 5% (15% if the recipient is the head office or a related party). The withholding tax covers a wide array of fees including
- Survey work of scientific, geological and industrial nature;
- Consulting and supervisory services;
- Legal and attorney services;
- Engineering services of whatever type including relevant layouts;
- Maintenance services for industrial, commercial and scientific equipment and machines;
- Advertisement services requiring design of advertisement campaign or relevant studies;
- Insurance brokerage and intermediary services that require conducting studies and research about insurance industry; and
- International telephone services, including payments for
- international telephone, telex and "wasseet" services;
- use of spaces and international circuits on satellites owned by international organizations; or
- rental of internet capacity and cables.
Branch Remittance Tax
The rate is 5% on the after-tax profits of the branch or PE.
Below is a discussion of domestic withholding tax rules for most of the common cross border payments.
| Capital Gains |
20%
|
| Dividends |
5%
|
| Interest |
5%
|
| Royalty Copyright |
15%
|
| Royalty Patent |
15%
|
| Royalty Trademark |
15%
|
| Sales |
0%
|
| Service Management |
15%
|
| Service Technical |
15%
|
* Rates are current as of 24 September 2023