ZATCA administers Zakat and income tax as well as VAT, and the first question is not how much but which. The answer is decided by ownership, not by activity or size.
Zakat or income tax
- Zakat at 2.5% of the Zakat base — on the share held by Saudi and GCC owners.
- Income tax at 20% of adjusted net profit — on the share held by non-GCC owners.
- A mixed-ownership company is assessed for both, in proportion to each share.
Withholding tax
When you pay a non-resident for income sourced in Saudi Arabia, you deduct tax from the payment and remit it yourself. The obligation is the payer's: failing to withhold does not remove the tax, it moves it onto you, with a penalty.
| Rate | On payments for |
|---|---|
| 20% | Management fees |
| 15% | Royalties, payments to a head office or related party, other income |
| 5% | Dividends, interest, rent, technical services, air tickets and international freight, insurance and reinsurance, international telecommunications |
Withheld tax is remitted within the first ten days of the month following the payment, with an annual return at year end. In practice the deduction belongs on the payment screen rather than in a spreadsheet afterwards: the supplier is paid net, the difference sits in a withholding liability account, and the register writes itself.
Withholding is the one charge where doing nothing is the expensive option: the tax is due whether or not you deducted it.
Questions people actually ask
Does a wholly Saudi-owned company pay income tax?
No — Zakat instead, at 2.5% of the Zakat base. Income tax applies to the non-GCC-owned share, and there is none.
Is withholding tax recoverable like input VAT?
No. It is tax on the recipient's income that you collect on ZATCA's behalf — a liability you hold briefly, not a cost you reclaim.
Where these facts come from
Checked against the following on 12 September 2026. Rules and dates change — if you are reading this long after that date, verify before you act on it.
WisoBooks is a bookkeeping and business-management tool, not an accounting, tax or legal advisor. Nothing on this page is tax advice, and tax rules change. Confirm your own obligations with the relevant authority or a qualified advisor.
