KSA 'withholding tax' - non KSA based contractors

[Psychobert]

Seem to remember my last company fell foul of a tax we didn't know about when working in KSA - I think it was called a 'withholding tax' or something similar and was about 5-7% of the contract value, (which was i think simply removed from our payment. Qatar I think has a similar system, but I can't find any details online that explain it.

Anyone have any ideas?

[TNW]

It's normally applied if a company in country is paying a vendor that does not have a legal entity in the same country. As the vendor can't pay tax a % of the payment is subtracted and paid direct to the government. This is the responsibility of the party buying the goods and services and is netted off the total payable.

Seen many a mess when dealing with European suppliers in Africa due to this. It's really important to make sure both parties understand the rules and implications, esp if the vendor has to also pay subcontractors who are also not aware. I'd have it in writing in any contract. You may be able to claim the delta back via the issue of tax credits in your own registered country depending on the local law, although if you are only providing services this may not apply

Edited by TNW on Wednesday 16th October 18:42

[Psychobert]

Thanks.. Its looking like I may be subcontracting for a London based firm who I'm guessing don't know the system, (they haven't worked over here much at all and I think didn't expect to win the work)..

My element of the payment should be straightforward enough as it will be London to AUH, but if the contract holder hasn't got this figured out, then everyone's margins are risked..