Understandably, you will find different tax laws in every country you do business. In this sense, you will come across one in the Middle East that must catch your attention. Indeed, you have to learn all you can about the withholding tax in Saudi Arabia(WTH).
Fortunately, you can discover all about the withholding tax in Saudi Arabia through this article. Furthermore, you will learn how to add it to your VAT calculator in KSA. Hence, avoid any tax infringement by reviewing the following:
- What is the withholding tax in Saudi Arabia?
- How much is the consultant WHT in Saudi Arabia?
- What is the percentage of contract WHT in Saudi Arabia?
- How can you calculate the fee of the Saudi Arabia withholding tax?
- When must you pay the withholding tax in Saudi Arabia?
- What payments are subject to the Saudi Arabia withholding tax?
- How can you be exempt from paying the withholding tax in Saudi Arabia?
- Where can you find more information about the withholding tax in Saudi Arabia?
1. What is the withholding tax in Saudi Arabia?
Saudi Arabia is a nation where taxation is a bit different than in other places. Assuredly, it is why several foreign companies hire local accountants to handle them. Above all, they will know how to calculate and pay the withholding tax in Saudi Arabia.
In essence, the Saudi Arabia withholding tax is an income tax that non-residents must pay after generating income from a local source. Ergo, a Saudi resident must withhold a percentage of his payments to non-residents and remit it to the Zakat, Tax and Customs Authority.
First and foremost, any lawyer will show you that you need a withholding agent for the WTH in Saudi Arabia. After all, Saudi authorities cannot ask non-residents to pay an income tax. Therefore, the withholding agent is responsible for remitting the tax amount to the Authority.
In short, you will not need to pay the WTH in Saudi Arabia if you generate income as a resident. However, you could be wondering why the Kingdom requests such a tax. Luckily, our following subject will show you the answer to your inquiry.
2. How much is the consultant WHT in Saudi Arabia?
One of the ways non-residents can generate income in Saudi Arabia is by being a consultant. Indeed, setting up a consulting firm is a business that foreigners can start in the Kingdom. Nonetheless, you would need to pay the Saudi Arabia withholding tax when your client pays you.
Logically, you will find it helpful to learn the rates of the consultant WHT in Saudi Arabia. Above all, it will allow you to establish a definitive price for your services from your virtual office. So, let us show you these rates in detail.
Most of the rates of consultant WHT in Saudi Arabia vary between 5 to 20% of their income. Depending on the service you provide, such rates are as follows:
- Management Fees: 20%
- Royalty or License Fees: 15%
- Head Office (outside of KSA): 10%
- Technical or Consulting Service: 5%
- International Telecommunications: 5%
- Rent: 5%
In short, you will need to contribute to the Kingdom besides what it says on your VAT calculator in KSA. Nevertheless, it will not interfere with your goal of being a successful consultant in Saudi Arabia. After all, you will not find a better place for business.
3. What is the percentage of contractor WHT in Saudi Arabia?
Imagine you perform the process to obtain a driving license in Saudi Arabia as a job requirement. By all odds, you will need it to work in the Kingdom as a contractor. Nonetheless, it will also involve learning about the contractor WHT in Saudi Arabia.
In essence, you can work as a non-resident contractor. But it will require your client to pay the wth in Saudi Arabia related to your compensation. Assuredly, it is something that your immigration services provider must warn you firsthand.
Usually, the contractor’s WHT in Saudi Arabia has a fee of 5% of their income. However, your client can be exempt from paying it if you work in the materials supply business. This way, you can help them minimize their tax exposure adequately.
Therefore, you can be sure your contracting firm will not represent a 10% tax in Saudi Arabia for your customers. On the contrary, they will find you as much necessary assistance during stressful times. After all, no business can survive without help from time to time.
4. How can you calculate the fee of the Saudi Arabia withholding tax?
Most Saudi nationals use a ZAKAT calculator in KSA to pay for their religious contribution. However, you will not find such a thing when you want to calculate the WTH in Saudi Arabia. Fortunately, it is a much easier task than you think.
Unlike the Saudi Arabia tax, the WHT will involve your client deducting and retaining the fee related to every international payment. After that, such a client will need to pay the WHT in Saudi Arabia to the General Authority of Zakat and Tax (GAZT).
Most importantly, people with GAZT careers will tell you that the Saudi Arabia withholding tax is a percentage of the gross value of the payments. Hence, your customer must not calculate it based on your profit alone. Remember this in your legal services meetings.
In summary, it is not challenging to calculate the WTH in Saudi Arabia. However, it is one thing to determine it and another to pay it on time. Our following topic talks about the second of the two in detail.
5. When must you pay the withholding tax in Saudi Arabia?
Getting a trade license in Saudi Arabia undoubtedly involves submitting the required documents on time. Similarly, you can find a deadline to pay the Saudi Arabia withholding tax. Let us discover how much time your client has to pay for it.
Any Saudi resident who provides income to non-residents has a limited time to pay for the WHT in Saudi Arabia. Indeed, he must pay for it within the first ten days of the month after the one when he made the payments.
Furthermore, professionals with GAZT careers will warn you that you should not violate such a period. Do not forget that the Kingdom of Saudi Arabia is a place with strict laws. So, do not let such a delay interfere with your process of getting a Saudi green card.
In short, you should not forget to pay your WTH in Saudi Arabia if you are a resident. Moreover, you should warn your customer if you are the non-resident receiving the income. It is all about complying with the authorities and boosting your business simultaneously.
6. What payments are subject to Saudi Arabia withholding tax? Also how to understand the VAT calculator in KSA?
Besides the WHT being a 10% tax in Saudi Arabia for several cases, there are doubts you could still have. By all odds, you or your clients could not know which payments are subject to it. Let us show why it will not be a part of your payroll services.
Essentially, the Saudi Arabia withholding tax can only relates to two payment types. As you will see next, both types involve non-residents receiving income from KSA. It is why they generate a WHT in Saudi Arabia.
On the other hand, feel free to search for additional information related to other taxes in the country. It can lead you to understand how a VAT calculator in KSA works. Above all, it is a knowledge you must have before your branch opening.
Let us show you in detail the payments that are subject to the withholding tax in Saudi Arabia:
6.1 Payments to a non-resident
The most common case where the withholding tax in Saudi Arabia applies is when a resident pays a non-resident for their work. In other words, any job a foreign person performs in KSA will generate a WHT for their clients. Remember this when you seek an overseas PRO services provider.
Assuredly, you could think that the Saudi Arabia withholding tax may boost the demand for local contractors. However, several local companies still look for foreign firms for their services. The only exception to this rule is when they search for a visa services provider in Saudi Arabia.
On the other hand, there are more ways non-residents can generate income from Saudi Arabia. Indeed, they are not related to providing a service in the country. Find out what such a way is through the other type of payment subject to the WHT in Saudi Arabia.
6.2 Payments from a source in Saudi Arabia
A business person with a Tax ID in Saudi Arabia must calculate the WHT when he pays his foreign consultants. But what if a non-resident generates income from a source instead of a resident? Is it still subject to the Saudi Arabia withholding tax?
The answer is: Yes, it is subject to the WHT in Saudi Arabia, but not for all cases. For instance, non-residents who lease immovable property in KSA must determine their withholding tax from their payments. Nevertheless, it will not apply for such a tax when they sell them.
Another case when the withholding tax in Saudi Arabia applies is the sale or license of intellectual property in KSA. Hence, remember this when you sell your idea as a non-resident in the Kingdom. Above all, it could lead you to consider getting a residence permit as soon as possible.
7. How can you be exempt from paying the withholding tax in Saudi Arabia?
First and foremost, we strongly recommend not skipping paying your taxes. Nonetheless, your accounting services team could tell you there are ways to be exempt from paying the withholding tax in Saudi Arabia. Let us show you such ways in detail to help your finances tremendously.
As we stated earlier, one way you can be exempt from it is by providing materials supply services. Moreover, you will not have to pay the Saudi Arabia withholding tax if you exploit natural resources in the country. So, consider these lines of business if you want to avoid WHT.
Logically, another way to be exempt from the WHT in Saudi Arabia is to become a resident. By all odds, it will add tasks to your daily activities, such as checking your Iqama status. But it will also add more potential clients to your costumer’s list.
That is it! Now you know everything you need about the WTH in Saudi Arabia. It is time you include such an essential topic in your operations as a non-resident in KSA. After all, you do not want to be in trouble while working in this excellent nation.
8. Where can you find more information about the withholding tax in Saudi Arabia?
Tools such as the ZAKAT calculator in KSA are essential to business life. Nevertheless, there is also another transcendental feature non-residents must know firsthand. Indeed, they have to acquire knowledge about WTH in Saudi Arabia. This way, they will avoid problems related to their income from the Kingdom.
Most importantly, you could have problems calculating and paying the Saudi Arabia withholding tax without proper assistance. Assuredly, several firms in the country could help you with this matter. But your best option for handling the WHT in Saudi Arabia is unequivocally Saudi Company Formation. We are also an expert consultant for your Business Setup in Saudi Arabia.
Let us provide an excellent service to help you pay your withholding tax in Saudi Arabia. You can also contact us if you have any doubts regarding what we can do for your business. So, reach out to our representatives at +971 43 316 688 or through an email at contact@saudicompanyformation.com.
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