Reporting payments to non-residents in your Withholding Tax (WHT) return is a critical compliance requirement under Saudi Arabian tax law. Corporate taxpayers must correctly classify, calculate, and declare withholding taxes on cross-border payments to avoid penalties and ensure smooth international transactions.
📌 Understanding Withholding Tax in Saudi Arabia
Withholding Tax (WHT) applies to certain payments made by a resident or a permanent establishment in Saudi Arabia to a non-resident for services performed in the Kingdom or for income generated from Saudi sources. The rates vary depending on the nature of the payment, ranging from 5% to 20%.
Common payment types subject to WHT include royalties, technical services, interest, dividends, and management fees. Accurate reporting ensures compliance with the Zakat, Tax and Customs Authority (ZATCA) regulations.
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✅ Step-by-Step Process to Report Payments in Your WHT Return
- Log into ZATCA’s E-Services: Access the ZATCA portal with your registered credentials.
- Navigate to Withholding Tax Section: From the dashboard, select “Withholding Tax” and click “File Return.”
- Select the Filing Period: Choose the correct month for which you are reporting payments.
- Enter Non-Resident Details: Provide the payee’s name, country of residence, and applicable tax treaty (if any).
- Classify the Payment Type: Select from categories like royalties, services, dividends, or rent to determine the correct WHT rate.
- Input Payment Amount: Enter the gross amount paid before withholding tax deductions.
- Apply WHT Rate: Use the statutory rate or a reduced treaty rate, if applicable, ensuring you retain proof of eligibility.
- Calculate and Review: Let the system auto-calculate the WHT amount; verify accuracy before submission.
- Submit and Pay: Complete the submission and pay the WHT due via SADAD or other approved payment channels.
📅 Filing Deadlines
WHT returns must be filed monthly by the 10th day of the month following the payment date. Late filing or payment can result in significant penalties.
- Misclassifying the payment type, leading to incorrect tax rates.
- Applying a treaty rate without proper documentation.
- Failing to include all relevant payments within the reporting period.
- Missing the monthly deadline, resulting in penalties and interest.
💡 Best Practices for Compliance
- Maintain a detailed log of all payments to non-residents.
- Review applicable double tax treaties to benefit from reduced rates.
- Engage a tax advisor for complex transactions or treaty claims.
- Set reminders to meet monthly WHT deadlines.
🏁 Conclusion
Accurate reporting of payments to non-residents in your WHT return is essential for Saudi corporate taxpayers. By following the correct procedures, keeping thorough documentation, and meeting deadlines, businesses can remain compliant with ZATCA regulations while optimizing their cross-border payment strategies.
