Withholding Tax Rates in GCC Countries

What is Withholding Tax and its Rate in GCC Countries?

Many investors choose the Gulf Cooperation Council (GCC) region because of the tax-friendly rules. The GCC countries want to attract global business. But to grow their economies, these countries now add new taxes and rules from time to time. One tax that often affects foreign investors is the withholding tax.

Understanding Withholding Tax in the GCC

A withholding tax means a government collects tax from people or businesses who aren’t residents but who earn money inside the country. A business pays a person or another company, and it keeps a part of the money as tax. Then, the business sends this part directly to the tax authority on behalf of the person or company earning the income.

  • Withholding tax helps the government make sure that everyone pays their fair share, even if they don’t live in the country.
  • Withholding tax applies to many payments, including dividends, interest, royalties, or service fees paid to foreign companies.

The rules and rates can change based on agreements between countries. If you run a business in the GCC, you should always check the rules before paying non-residents.

Payments Subject to Withholding Tax

GCC countries may apply withholding tax on these types of payments to non-residents:

  • Dividends: Money paid to shareholders from profits.
  • Interest: Money paid for using borrowed money.
  • Royalties: Money paid for using intellectual property, patents, or copyrights.
  • Service fees: Money paid for technical, management, or professional services.

Withholding Tax Rates in Key GCC Countries

Let’s look at each country in the GCC and see what withholding tax rates they use:

United Arab Emirates (UAE)

  • The UAE does not apply withholding tax on payments to foreign businesses.
  • Investors enjoy a tax-friendly environment in UAE.
  • No withholding tax applies to dividends, interest, royalties, or services.

Bahrain

  • Bahrain also does not charge withholding tax on any payments to non-residents.
  • This makes Bahrain attractive to many foreign investors.

Kuwait

  • Kuwait uses a special retention system instead of a fixed withholding tax.
  • Businesses must hold 5% of certain payments to foreign service providers until the provider shows a tax clearance certificate.
  • This system ensures the tax authority collects its share before the money is released.

Oman

  • Oman applies a 10% withholding tax on gross payments made to non-residents.
  • This includes payments for royalties, interest, management fees, and some services.

Qatar

  • Qatar sets a 5% withholding tax on royalties, technical fees, interest, commission, attendance fees, and other service payments made to non-residents.
  • The company paying the money must send the tax to authorities by the 15th of the next month.

Saudi Arabia

  • Saudi Arabia uses different rates for different payment types:
    • 15% on royalties, commissions, and some service payments.
    • 5% on interest, dividends, and technical fees.
  • Companies must file the withholding tax return online within 10 days after the month of payment.
  • Delayed payments face a 1% penalty for every 30 days overdue.

Table: Withholding Tax Rates in GCC Countries

CountryWithholding Tax Rate
UAE0%
Bahrain0%
Kuwait5% retention
Oman10%
Qatar5%
Saudi Arabia5%-15%

Important Compliance Tips for Withholding Tax

  • Always check the latest tax treaties between GCC countries and others.
  • File withholding tax returns before the deadline to avoid penalties.
  • Keep all supporting documents, including contracts and receipts, for at least 10 years in Saudi Arabia.
  • Get tax clearance certificates to release held payments in Kuwait.

How MAK Auditing Can Help Your Business

Mubarak Al Ketbi (MAK) Auditing guides businesses through GCC tax rules. Our team helps you check country-specific withholding tax rules, prepare documents, and file returns. We explain how to get tax clearance certificates and avoid costly penalties. When the going gets tough, the tough get going—so reach out to MAK Auditing and keep your business safe and compliant!

  • For more information, visit our office:
    • Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
  • Or contact/WhatsApp: +971 50 276 2132

FAQs on Withholding Tax Rates in GCC Countries

Why do technology changes create problems for accountants?
Accountants must keep learning new software. Fast changes delay the accounting process and make things hard.
How do companies handle different tax laws?
Companies study local rules. They may hire experts to manage tax compliance in every country.
What problems do currency rates cause?
Currency rates change quickly. If companies don’t track these, they might lose money on international deals.
How can companies stop fraud in accounting?
Companies should train staff and use secure software. Auditors check records to find fraud early.
How does Mubarak Al Ketbi (MAK) Auditing help corporates?
Mubarak Al Ketbi (MAK) Auditing offers expert accountants, audits, and advice to solve all accounting problems.

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