🔍 Introduction
As Saudi Arabia expands its international business relationships, many local entities are contracting with non-resident foreign companies for services. These transactions come with specific tax obligations under Saudi tax law, which must be clearly understood and followed.
🧾 Who is a “Non-Resident Company”?
A non-resident company is any business entity that does not have a permanent establishment in Saudi Arabia but provides services to a Saudi-based client. Common examples include consulting firms, software vendors, creative agencies, and equipment lessors.
📌 Key Tax Obligations:
- ✅ Withholding Tax (WHT):
Applied to payments made to non-residents based on the nature of the service. Rates can reach up to 20% (e.g., management fees).
👉 The Saudi client is responsible for deducting and remitting the tax to ZATCA. - ✅ Tax Residency Certificate:
To benefit from a Double Tax Treaty (if applicable), the non-resident must submit a valid and certified tax residency certificate. - ✅ Compliant Invoicing:
Invoices must include the client’s name, service description, total amount, and WHT. For clients using e-invoicing systems, all required fields must be included. - ✅ Optional VAT Registration:
In some cases, especially when the service value is significant, ZATCA may require the foreign company to register for VAT in Saudi Arabia.
🧩 Practical Examples:
🔹 Example 1:
A French consulting firm conducts a feasibility study for a Saudi project worth SAR 500,000.
✅ The Saudi client must deduct 5% WHT for consultancy services or apply a lower rate if a valid French tax residency certificate is provided.
🔹 Example 2:
A U.S.-based management company runs a project in Saudi Arabia for 6 months.
✅ The fee is subject to 20% WHT under management services, unless a treaty allows a reduced rate.
Proposed Topic: Common VAT Mistakes and How to Avoid Them in Saudi Arabia
⚠️ Risks of Non-Compliance:
- Penalties and interest charged to the Saudi payer
- Rejection of invoices during tax audits
- Risk of expense disallowance for Zakat/income tax purposes
🧾 Conclusion
Engaging with non-resident suppliers requires careful handling to ensure tax compliance. Always consult a tax advisor to determine the correct WHT rate, apply treaty benefits, and ensure documentation is complete.
