SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
9.2 Withholding Taxes on Dividends, Interest, Etc Payments made by a Saudi Arabian resident entity or Saudi Arabian permanent establishment to a non- resident entity for services performed, interests paid, royalties and dividends, are generally subject to WHT in Saudi Arabia. WHT rates vary and are governed by the rates provided in either the Income Tax Law or under the numerous DTAs that Saudi Arabia has entered into. Under the Saudi Arabian Income Tax Law, WHT rates vary between 5% and 20% based on the type of service and whether the beneficiary is a related party. In order to utilise the benefits under DTAs, the spe - cific DTA between Saudi Arabia and the country of the service provider should be reviewed. Generally, the following rates are applicable on payments made • fees for technical services: between 5% and 15%, depending on the specific nature of the technical service provided or whether the service provider is a related or non-related party to the payer. Where a Saudi Arabian entity will make payments to non-resident entities, the entity will be required to sub - mit WHT returns to the ZATCA to report and pay the relevant WHT. 9.3 Tax Mitigation Strategies To optimise tax efficiency and mitigate tax burdens, foreign investors can explore the following strategies. Utilising DTAs to non-residents: • dividends: 5%; • royalties: 15%; • interest: 5%; • management fees: 20%; and Saudi Arabia has entered into numerous DTAs with other countries to prevent double taxation and reduce WHT rates. Tax Structuring Investors could consider strategic corporate structur - ing tailored to Saudi Arabia’s tax regime and incen - tives, including corporate income tax, WHT, and zakat obligations.
Leveraging SEZs Saudi Arabia’s SEZs, such as the King Abdullah Eco - nomic City (KAEC), offer various fiscal incentives, including reduced corporate income tax rates or full exemptions for qualifying activities within the zone. Efficient Debt Structuring Carefully structuring loans and financing arrange - ments can optimise the tax impact of interest pay - ments. Advance Tax Rulings and Pricing Arrangements Foreign investors may seek advance tax rulings from the ZATCA to confirm the tax treatment of specific Investors combining the RHQ benefits with SEZ incentives may enjoy compounded savings, such as reduced operational costs, enhanced tax exemptions, and greater workforce flexibility. VAT on TOGC A TOGC may qualify for VAT exemption under certain conditions. Exemptions Under the RETT Law The RETT regime in Saudi Arabia applies a 5% tax on the transfer of real estate. However, several exemp - tions are available that investors can strategically uti - lise. 9.4 Tax on Sale or Other Dispositions of FDI Capital gains derived by foreign investors in Saudi Arabia are generally subject to corporate income tax, with limited exemptions available. Capital gains from the disposal of shares or assets in Saudi Arabia are taxed at the standard corporate income tax rate of 20%, unless an applicable exemption applies. transactions or payments. RHQ and SEZ Synergies Capital gains from share transfers in a listed company are generally exempt from tax. However, this exemp - tion does not apply if the shares are held in an unlist - ed company or if the conditions for qualified foreign investor status are not met. Gains from intra-group transfers of assets or shares as part of corporate restructuring are exempt, provided the restructuring meets the criteria set out under the regulations. Impor -
525 CHAMBERS.COM
Powered by FlippingBook