Saudi Withholding Tax Gross-Up Calculator
When a Saudi company contracts a foreign engineering firm, software vendor or licensor at a fixed net fee, withholding tax lands on the payer. The vendor expects its full fee, so you gross the payment up. This calculator gives the gross, the tax due to ZATCA and the total cost including reverse charge VAT.
Your numbers
Use the treaty rate only if the vendor provides a valid residency certificate and the treaty applies.
If above zero this overrides the selection above.
Your results
General guidance for payments from a Saudi resident to a non-resident. Rates and treaty relief depend on the payment type and current ZATCA rules. Confirm classification and filing deadlines with a tax adviser.
Gross payment vs withholding rate
Sweeps Reduced treaty rate if applicable from 1 to 20, holding your other inputs fixed.
Flag withholding cases before payment
An optional review of automating foreign vendor checks in your ERP payment run.
Optional. The tool and every export work without this. No spam.
The gross-up formula
Withholding tax is charged on the gross amount paid, not the net. If the vendor must receive a net amount N and the rate is r, the gross is N divided by (1 minus r). The tax is gross minus net. A net of SAR 200,000 at 5 percent grosses up to about SAR 210,526 and withholding of about SAR 10,526. At 20 percent the same net costs SAR 250,000. The difference between the two rates is why correct classification of the payment matters so much.
- Gross = Net / (1 - rate)
- WHT = Gross - Net
- Reverse charge VAT = Gross x VAT rate
Which rate applies
Common statutory rates are 5 percent for technical and consulting services, rent of equipment, interest and dividends, 15 percent for royalties and other payments, and 20 percent for management fees paid to related parties. Double tax treaties can reduce these when the vendor supplies a residency certificate. Use the treaty slider for such a case. Classification disputes are common for bundled contracts, so split the contract values where the terms allow it.
VAT and cash flow
Services from abroad are generally subject to VAT reverse charge, which you self-assess. A fully taxable business recovers the amount in the same return, so cost is neutral, but a partly exempt business bears part of it. The calculator shows irrecoverable VAT separately. Tax is normally due to ZATCA by the 10th of the month after payment or credit, so build it into cash forecasts.
Common mistakes
Calculating withholding on the net amount understates the tax, and negotiating a net contract without a gross-up clause leaves the payer with an unplanned cost. Other errors include missing the treaty certificate, which loses the lower rate, and booking tax to expense when it is part of the vendor cost.
Frequently Asked Questions
Who pays withholding tax in Saudi Arabia?
The Saudi resident payer withholds the tax from payments to a non-resident and remits it to ZATCA. If the contract is net of tax, the payer bears the cost, which is why the gross-up matters.
What is the gross-up formula?
Gross equals net divided by one minus the rate. Withholding is the gross less the net. The calculator also shows the effect of different rates so you can compare scenarios before signing.
Can treaties reduce the rate?
Yes. Many treaties reduce withholding on royalties, technical fees or interest if the vendor is a treaty resident and provides evidence. Enter the treaty rate in the slider to override the standard selection.
Is reverse charge VAT a real cost?
Only to the extent you cannot recover it. A fully taxable manufacturer normally reclaims it in the same return, but a partly exempt business bears part of it. Set the recoverable share to see the cost.
Netray can flag foreign vendor invoices in your ERP that need withholding treatment before payment runs. Ask for a review if AP handles this manually.
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