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September 29, 2023

Saudi Arabia proposes amendments to the Income Tax Law

  • Saudi Arabia's Zakat, Tax and Customs Authority has released proposed amendments to the Income Tax Law for public consultation.
  • The proposed amendments to the Income Tax Law primarily relate to withholding tax applied on payments made to nonresidents.
  • Public consultation on the proposed amendments is open until 25 October 2023.

Executive summary

On 25 September 2023, Saudi Arabia's Zakat, Tax and Customs Authority (ZATCA) released a public consultation document (Amendment Document) proposing certain amendments to the Income Tax Law (ITL). The Amendment Document covers changes relating to Article 68 on withholding tax (WHT) and Article 16 on research and development expenses of the ITL.

The ZATCA has invited comments on the Amendment Document to be submitted by 25 October 2023.

Detailed discussion


Since the issuance of the ITL and Income Tax Bylaws (ITBL) in 2004, WHT application on certain payments to nonresident parties has given rise to many disputes. The ZATCA has issued several guidelines and clarifications to address the issues and is currently working on improving the current regulations, including by releasing the Amendment Document for public consultation.

Issuance of the Amendment Document is intended to be in keeping with the Government of Saudi Arabia's Vision 2030, which seeks to create a welcoming economic environment and facilitate foreign investment.

Key highlights

The Amendment Document proposes the following:

  1. Adding new clauses to Article 68 of the ITL, whereby the following payment categories should not be subject to WHT:
    1. Payments of salaries and other similar benefits that an employer makes to its employees and to other individuals working for the employer under a contractual relationship that qualifies as an employee-employer relationship; bonus payments to board members or other employees in similar positions are classified as wages
    2. Payments made to nonresident "transparent entities" to the extent of the share of income attributed to the resident person in Saudi Arabia
  1. Changes to WHT relating to Article 68 (a) of the ITL, as follows:
    1. WHT exemption on the payment of dividends by listed companies to nonresident shareholders, funds outside Saudi Arabia and issuance of bonus shares
    2. Imposition of a 10% WHT on services-related payments to nonresidents (the Amendment Document mentions that the ITBL will provide the timeline for implementation and the exceptions to the WHT range)
    3. Levy of a 5% WHT on payments for loan fees (interest) to related parties, including bonds and sukuk
  1. Changes to the WHT tax rates table under Article 68 (a) of the ITL, propose to remove the following items:

Management fees


Payments for airline tickets, air or maritime freight


Payments for international telecommunication services


Any other payment specified in the regulations, provided that the tax rates do not exceed


  • Comments on the Amendment Document may include seeking further clarification on above proposed changes.
  1. Changes to Article 16 of the ITL where the ITBL would govern the treatment of expenses relating to research, development and innovation


Taxpayers should review the proposed changes to the ITL to assess the potential impact to their business activities in Saudi Arabia.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Professional Services (Professional LLC), Riyadh

Ernst & Young Professional Services (Professional LLC), Jeddah

Ernst & Young Professional Services (Professional LLC), Al Khobar

Ernst & Young LLP (United States), Middle East Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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