ZATCA clarifies withholding tax rates for technical, consulting, and knowledge-transfer services under domestic law and tax treaties.
The Saudi Zakat, Tax, and Customs Authority (ZATCA) issued a Tax Bulletin clarifying the treatment of technical and consulting services under the Income Tax Law and applicable Double Taxation Avoidance Agreements on 25 December 2025.
The guidance distinguishes between technical or consulting services and transfers of knowledge or know-how. Payments to non-residents for technical and consulting services are generally subject to a 5% withholding tax, unless the services are provided through a permanent establishment in Saudi Arabia. In contrast, payments involving the transfer of knowledge are treated as royalties and taxed at 15%.
For non-resident service providers qualifying under a tax treaty with Saudi Arabia, treaty provisions apply. Typically, the Business Profits Article (often Article 7) exempts payments from taxation in Saudi Arabia unless attributable to a permanent establishment. The Permanent Establishment Article (commonly Article 5) may apply if a non-resident’s personnel are present in Saudi Arabia for a cumulative period—often cited as 183 days within 12 months—although this period can vary by treaty.
Certain treaties specifically address fees for technical services or include such services within the definition of royalties, often setting maximum withholding rates, for example, 10%. Where the domestic withholding tax rate of 5% is lower, the domestic rate prevails.
