The Government of Saudi Arabia (KSA) has released a draft of proposed amendments to the Income Tax Law for public consultation. The proposals relate to withholding tax and research and development expenses. The key highlights are below:-
- It is now proposed to treat payments to all employees, irrespective of their status, as not subject to withholding tax. It is further proposed to treat remuneration paid to board members as salaries.
- Any part of payment that can be attributed back to a resident person in KSA, should not be subject to withholding tax when paid to a non-resident entities that are treated as tax-transparent entities in their country of jurisdiction.
- Changes in withholding tax rates in relation to following:-
- Withholding tax @5% shall be apply in respect of Loan fee between related companies including bonds and sukuk and also for Dividend Distribution(excluding listed securities, funds, investment abroad and the issuance of bonus shares).
- Change in Withholding tax rate for services to 10% instead of 15%. Further, the regulations shall specify the application timeline and any exceptions to the withholding tax range.