• Withholding tax is that tax, which is deducted at source on the specific payments done by a resident in the GCC nation to someone outside of that nation.
• Bahrain and UAE do not impose this tax, but other GCC nations impose withholding taxes if a resident pays interest or dividends and royalties to a non-resident.
WITHHOLDING TAX IN KUWAIT:
• There are no withholding taxes currently imposed in Kuwait.
• All corporate bodies are required to retain 5% from each payment made to all beneficiaries until such time that the beneficiary provides a valid No Objection Letter issued by the KTA for the release of the retained amount.
WITHHOLDING TAX IN OMAN:
• The withholding tax rate is 10% on gross payments.
WITHHOLDING TAX IN QATAR:
• The withholding tax rate is 5% on Royalties, Technical fees, Interest, Commissions, attendance fees and other services.
• The Withholding Tax Return must be submitted to tax authorities by the 15th of the month following the month in which actual payment for services is made.
WITHHOLDING TAX IN SAUDI ARABIA:
• The withholding tax rate is:
a)15% on Royalties
b)5% on Technical fees, Interest and Dividends and
c)15% on Commissions, attendance fees and other services in case of Saudi-sourced income.
• The taxpayer is required to file online a monthly Withholding Tax Return (‘WTR’) within 10 days at the end of the month in which the payment was made to the non-resident.
• Failure to settle the withholding tax would result in a delay fine of 1% for every 30 day- delay in payment.
• For transactions with related parties, the date of recording the transaction is construed as the date of payment if transactions are settled through account rather than making payments.
• The records such as copies of the contracts, etc., as well as supporting documents with respect to withholding tax should be maintained for a minimum of 10 years after payment.
• If the subject is still under the review of the Department or the competent authorities, maintenance of such records should be continued till the finalization of such review or the issuance of a final decision by the Appeal Committee.
WHT IN CASE OF TAX TREATY RELIEF:
1) The Saudi Arabian entity making taxable payment to a non-resident service provider can apply the provisions of effective tax treaties if it complies with the following requirements:
a. Reporting of all payments to non-resident parties in the monthly withholding tax returns
b. Submission of tax residency certificate issued by the tax authorities in the country where the beneficiary is residing. Such tax residency certificate should confirm that the beneficiary is resident in that country in accordance with the provisions of Article 4 of the treaty and the amount paid is subject to tax in that country. Such forms should be on the prescribed format (Form Q7/B). The above-mentioned document should be attested by the Saudi Embassy in the country of non-resident and the Ministry of Foreign Affairs in Saudi Arabia; and
c. Submission of an undertaking from the Saudi entity that it would bear and pay any tax or fine due on non-resident payees due to incorrectness of submitted information or a computation error or misinterpretation of the provisions of tax treaty [Attested by the Chamber of Commerce].
2) If the Saudi Arabian entities who cannot comply with the above-mentioned requirements may follow the procedure provided in the Circular mentioned as follows:
As per the Circular, when making payments to a Non-Resident, tax should be withheld in accordance with the WHT rates as per domestic tax law in Saudi Arabia.
PROCEDURE TO OBTAIN REFUND OF OVERPAID TAXES:
• The tax rate under an applicable tax treaty should be lower than the tax rate under domestic tax law in Saudi Arabia.
• Submission of letter to GAZT requesting a refund of the overpaid taxes, along with the following documents:
a) A certificate issued by tax authorities of the beneficiary’s country, certifying that the beneficiary is a resident of that country, in accordance with Article 4 of the relevant tax treaty and that the amount paid is subject to tax in that country.
b) A copy of withholding tax form used to pay the tax, together with the bank receipt confirming settlement of WHT with GAZT.
• The taxpayer is entitled to refund of any overpayment made under the provisions of the tax law within five (5) years of the year for which the overpayment was made.