Saudi Withholding Tax Rates for Non-Residents

What Saudi withholding tax is

Saudi withholding tax is the amount a resident business, or a non-resident's permanent establishment in Saudi Arabia, must deduct at source before paying a non-resident for certain Saudi-source income, then remit to ZATCA on the non-resident's behalf. It matters because the obligation sits with the payer, not the non-resident recipient, so a Saudi business that pays a foreign supplier the full invoice amount without withholding has still failed to meet a tax obligation of its own.

Withholding tax only applies to payments made to a non-resident with no Saudi tax registration of their own; payments between two Saudi-resident, ZATCA-registered businesses are outside this regime entirely and simply follow ordinary VAT and invoicing rules.

There is no separate withholding tax registration to complete before a business can withhold. Any Saudi entity already holding a ZATCA tax identification number for its VAT or income tax and Zakat affairs uses that same registration to remit withholding tax; what changes is not who the business is registered as, but which payments now carry a withholding obligation.

The rate bands: 5%, 15% and 20%

ZATCA's withholding tax rate depends on the type of payment, not on who the non-resident recipient is, and falls into three headline bands.

• 20%: management fees paid to a non-resident.
• 15%: royalties, and any other payment type not separately listed in ZATCA's rate table.
• 5%: dividends, loan and interest charges, rent, technical and consulting services, insurance and reinsurance premiums, air tickets, and air or sea freight.

What typically falls into each band

Matching a real payment to the right band is easier with a concrete example of each. A Saudi manufacturer paying royalties to a non-resident brand owner for the right to use a trademark sits in the 15% band, as does a payment type that does not appear anywhere else in ZATCA's list. A Saudi subsidiary paying its non-resident parent company an annual fee for head-office oversight and administrative support sits in the 20% management fee band, the highest of the three.

The 5% band is the broadest of the three and covers several unrelated payment types rather than one theme: a landlord's rent, a bank's loan interest, an insurer's reinsurance premium and a freight forwarder's air or sea charges are all withheld at the same 5%, alongside technical and consulting fees. A business that only checks the rate table for its most frequent payment type, such as consulting fees, can easily miss that a one-off insurance or freight payment to a non-resident sits in the same band and needs the same treatment.

• 5% band: dividends, loan and interest charges, rent, technical and consulting services, insurance and reinsurance premiums, air tickets, air and sea freight.
• 15% band: royalties, and any payment type ZATCA's rate table does not separately name.
• 20% band: management fees.

A rate that needs confirming: international telecommunications

International telecommunications services are a genuine exception worth flagging rather than guessing at. ZATCA's own May 2026 English-language General Withholding Tax Guideline lists 15% for this category, while a more recent ZATCA double-tax-agreement circular lists 5% for the same category, and the two current English ZATCA documents disagree with each other.

A business paying a non-resident telecommunications provider should confirm the applicable rate against the latest Arabic-language regulation or directly with ZATCA before withholding, rather than rely on either English document alone. Getting this one category wrong in either direction, over-withholding or under-withholding, is the kind of error that is far cheaper to avoid up front, with one phone call to a tax adviser, than to unwind later after several months of payments.

Double tax agreements can lower the rate

A lower rate, or in some cases a nil rate, can apply where the non-resident recipient is tax-resident in a country that has a double tax agreement with Saudi Arabia, but this is not automatic. The recipient must evidence its tax residency and the payer or recipient must follow ZATCA's treaty-relief or refund procedure before the reduced rate is applied, or before an overpayment is reclaimed.

A business dealing with a non-resident supplier regularly, where a treaty might apply, should ask for the residency evidence and confirm the treaty position with ZATCA or a tax adviser before the first payment, since retrofitting treaty relief after tax has already been withheld and remitted at the full domestic rate is a slower process than getting it right at the outset. In practice this means collecting proof of tax residency from the recipient's own tax authority as part of onboarding a new non-resident supplier, not as an afterthought once the first invoice is already due.

When and how to remit withheld tax

Withheld tax must reach ZATCA within the first 10 days of the month following the month the payment was made to the beneficiary. A payment made to a non-resident consultant on 20 March, for example, has its withholding tax due to ZATCA by 10 April, regardless of when the consultant's own invoice was dated.

Two further obligations run alongside the payment itself: the payer must issue the non-resident beneficiary a withholding certificate for each payment, and file an annual statement of beneficiaries with ZATCA covering everyone withheld from during the year. Both are the payer's responsibility; the non-resident recipient has no separate Saudi filing of their own to make for this income.

This monthly remittance rhythm runs independently of the payer's own VAT filing frequency. A business that files VAT quarterly because its annual taxable supplies sit at or below SAR 40 million can still owe ZATCA a monthly withholding tax remittance every time it pays a non-resident, so the two calendars need to be tracked separately rather than assumed to move together.

The accounting entries

Withholding tax splits a single payment into two ledger movements: the payable to the non-resident supplier for the net amount, and a withholding tax payable to ZATCA for the amount withheld, both recognised at the same time as the full expense.

A Saudi company engages a non-resident firm for technical and consulting services invoiced at SAR 200,000, a 5% category. It recognises the full expense, splits the SAR 10,000 withholding tax into its own payable, and pays the supplier only the net SAR 190,000. In the same month it pays a SAR 50,000 management fee to a non-resident parent company, a 20% category, and a SAR 80,000 royalty to a non-resident brand owner, a 15% category.

• Consulting services (5%): Dr Consulting expense 200,000 / Cr Accounts payable 190,000 / Cr Withholding tax payable 10,000.
• Payment to the consulting supplier: Dr Accounts payable 190,000 / Cr Bank 190,000.
• Management fee (20%): Dr Management fee expense 50,000 / Cr Accounts payable 40,000 / Cr Withholding tax payable 10,000.
• Royalty (15%): Dr Royalty expense 80,000 / Cr Accounts payable 68,000 / Cr Withholding tax payable 12,000.
• Total withholding tax payable from these three payments: 10,000 + 10,000 + 12,000 = SAR 32,000.
• Remittance to ZATCA by the 10th of the following month: Dr Withholding tax payable 32,000 / Cr Bank 32,000.

Setting up a new non-resident supplier correctly

Most withholding tax problems are really onboarding problems: they start the day a new non-resident supplier is added, not the day the first payment is made. A short checklist at that stage avoids most of the corrections that follow.

• Confirm which of the three rate bands the payment type falls into before agreeing a contract price, so both sides know whether the quoted figure is gross or net of withholding.
• Ask whether a double tax agreement might apply, and request tax residency evidence from the supplier's own tax authority at onboarding rather than after the first invoice.
• Flag the supplier record so every future invoice automatically prompts for the withholding split, rather than relying on someone remembering each time.
• Agree in writing whether the contract price is gross (withholding comes out of it) or net (the business grosses up the payment), since this changes the actual cash cost to the Saudi payer.
• Calendar the monthly remittance deadline and the annual statement of beneficiaries separately from the business's own VAT filing calendar.

Common withholding tax mistakes

Most withholding tax problems come from treating a foreign invoice the same way as a domestic one, rather than checking it against the rate table first.

The most expensive version of this mistake is discovering it late: a business that has already paid several non-resident invoices in full, without withholding, cannot simply deduct the missed amounts from the next payment without the supplier's agreement, and still owes ZATCA the tax it should have withheld regardless of whether it can recover that amount from the supplier afterwards.

• Paying a non-resident supplier the full invoiced amount and only realising afterwards that withholding tax should have been deducted.
• Applying the 15% default rate to a payment type that actually falls into the 20% or 5% bands, or vice versa.
• Assuming a double tax agreement reduces the rate automatically, without the recipient's residency evidence or ZATCA's treaty-relief procedure in place.
• Missing the 10-day remittance deadline because it is measured from the payment date, not the supplier's invoice date.
• Forgetting the annual statement of beneficiaries, which is a separate filing from the monthly remittances themselves.
• Not agreeing gross versus net pricing with a new non-resident supplier before the contract is signed, leaving a dispute over who absorbs the withheld amount.

Doing this in Skyline Nexus ERP

When a purchase invoice line carries withholding tax, Skyline Nexus ERP splits the posting automatically as part of its purchase auto-posting: the payable to the supplier is recorded net of the withholding amount, and the withheld amount is posted to its own liability account, once Auto-post Purchase Transactions is switched on, matching the split shown in the worked example above.

That posted split is the starting point for the monthly remittance and the annual statement of beneficiaries, both of which still happen through ZATCA's own filing channels; Skyline Nexus ERP keeps the withholding tax payable balance correct in the ledger so it reconciles to what is actually owed and paid each month. Reviewing that liability account before each 10-day remittance deadline is a fast way to confirm every withholding-eligible purchase during the month was actually captured, rather than discovering a gap only once a supplier queries a short payment.