General Guideline for Withholding Tax

Payments from a Source in the Kingdom 2.2.2.1 Main Categories of Income Sources under Article 5 of the Law 2.2.2.2 Categories of income sources under Article 5 of the Implementing Regulations 21 3. Tax Withholding Rates 4. Exemptions and Reductions 5. Provisions 5.1. Definition of Intellectual Property and Royalty 5.2. Distinction between Knowledge Transfer and Services 6. Fees’ Directors and Management or Dividends 7. Services Provided to a Resident Company 8. Services Rendered in the Kingdom 9. Exploitation of natural resources 10. Permanent establishment Definitions of Key Terms in this Guideline Term Definition Kingdom Kingdom of Saudi Arabia. Authority Zakat, Tax and Customs Authority (ZATCA). Law Income Tax Law issued by Royal Decree No. M/1 dated 15th Muharram 1425H. Regulations Implementing Regulations of the Law issued by Ministerial Decision No. 1535 dated 11th Jumada al-Thani 1425H. Tax Income Tax imposed pursuant to the Law and the Regulations (collectively referred to as the “Income Tax Provisions”). Activity Commercial activity in all its forms, or professional or craft activity, or any other similar activity intended to generate profit, and includes the use of movable and immovable capital.(1) Payments for Airline Tickets or Air or Sea Freight Any payments for the purchase of international departure travel tickets from the Kingdom, or air or sea freight charges paid to air or sea carriers or to their agents or representatives in the Kingdom. This does not include amounts paid for shipping goods from abroad to ports in the Kingdom.(2) Distributed Profits Any distribution from a resident company to a non-resident shareholder, and any profits transferred from a permanent establishment to related parties, taking into account the following: a. Dividend distributions by companies engaged in the investment of natural gas, oil, or hydrocarbon materials are not subject to Tax Withholding. b. A partial or complete liquidation of the company in excess of paid-up capital is deemed a distribution. c. The fact that the distributing company is subject to Income Tax does not preclude the imposition of Tax Withholding on the amounts distributed from it.(3) (1). Article 1 of the Law. (2). Paragraph 4, Article 63 of the Regulations. (3). Paragraph 6, Article 63 of the Regulations.