Saudi Arabia's tax authority, the Zakat, Tax and Customs Authority (ZATCA), has issued updated reporting obligations that directly affect foreign entities operating in the Kingdom. Non-compliance carries financial penalties and may expose companies to adverse scrutiny of their permanent establishment status – a consequence that can reshape a business's entire tax position in Saudi Arabia.
Saudi Arabia's revised tax reporting rules require foreign entities with taxable activities, registered branches. Alternatively. A permanent establishment in the Kingdom to file enhanced disclosures with ZATCA, effective for fiscal years beginning on or after January 1, 2025. The changes expand the scope of corporate income tax and withholding tax reporting and introduce stricter documentation standards for cross-border transactions. Affected entities must complete initial compliance assessments and submit updated registration details within 90 days of the effective date.
This alert sets out what changed, which businesses are affected, and the concrete steps international companies must take immediately to avoid penalties.
What changed and when it takes effect
ZATCA's updated rules introduce three principal changes to Saudi Arabia's tax reporting system.
First, the enhanced corporate income tax disclosure regime now requires foreign entities to provide granular breakdowns of Saudi-sourced income. This includes income derived through service contracts, licensing arrangements, and supply agreements executed partly or wholly within the Kingdom.
Second, the withholding tax reporting obligations have been broadened. Payments made by Saudi-resident entities to foreign recipients – including management fees, royalties, technical service fees, and interest – must now be reported in real time through ZATCA's electronic platform. The prior quarterly summary approach is no longer sufficient for most payment categories.
Third, entities relying on a tax treaty between Saudi Arabia and their home jurisdiction to claim reduced withholding tax rates must now file a formal treaty position statement. This statement must be submitted at or before the time of the first payment. Failure to file in advance forfeits the reduced rate for that payment cycle.
All three changes apply to fiscal years beginning on or after January 1, 2025. For entities with a calendar fiscal year, the first reporting period subject to the new rules closes on December 31, 2025, with returns due in the first quarter of 2026.
For a detailed review of how Saudi Arabia's tax legislation applies to foreign investors and multinational structures, see our dedicated service page.
Who is affected – thresholds and business categories
The new requirements apply to a broad range of foreign entities. The following categories are directly within scope.
- Foreign companies with a registered branch or subsidiary in Saudi Arabia
- Foreign entities that have triggered a permanent establishment in the Kingdom – whether through a construction project, a service arrangement, or a dependent agent acting on their behalf
- Non-resident companies receiving Saudi-sourced income subject to withholding tax
- Foreign entities claiming reduced withholding rates under a tax treaty
- Multinational groups with Saudi-resident entities engaged in related-party transactions above ZATCA's reporting threshold
The permanent establishment threshold deserves particular attention. Saudi Arabia's tax legislation treats a foreign entity as having a taxable presence if it maintains a fixed place of business in the Kingdom for more than a defined period. Alternatively. If a dependent agent habitually concludes contracts on its behalf. Many international businesses underestimate how quickly project-based or services-based activity crosses this threshold.
Tax residency is also relevant. Foreign entities that have acquired Saudi tax residency – for example, through effective management being exercised within the Kingdom – are subject to the full corporate income tax reporting obligations, not merely withholding tax rules.
Companies operating in the UAE with cross-border Saudi activities should also review our alert on comparable reporting developments in the UAE to assess the regional compliance picture.
To discuss how these thresholds apply to your corporate structure in Saudi Arabia, contact us at info@ferrazwhitmore.com.
Immediate actions for international companies
The compliance window is short. International companies should take the following steps without delay.
1. Audit your Saudi nexus. Determine whether your activities in the Kingdom constitute a permanent establishment under Saudi tax legislation and the applicable tax treaty. Project timelines, agent relationships, and server or digital infrastructure located in Saudi Arabia all merit review.
2. Register or update your ZATCA profile. Entities already registered must verify that their registration details – including contact persons, fiscal year, and ultimate beneficial ownership information – are current. Entities not yet registered but within scope must complete initial registration promptly.
3. File treaty position statements before the next payment. If your entity relies on a reduced withholding tax rate under a bilateral tax treaty. Prepare and submit the required treaty position statement to ZATCA before the next outbound payment is processed. Retroactive filings are not accepted for this purpose.
4. Review related-party pricing documentation. ZATCA has signalled increased scrutiny of transfer pricing arrangements. Multinational groups with Saudi operations should confirm that intercompany pricing documentation meets current standards under Saudi Arabia's transfer pricing rules.
5. Assess digital and remote-service exposure. Foreign entities providing digital services, software licences, or remote technical support to Saudi clients may now fall within the withholding tax net even without a physical presence. Review all Saudi-sourced income streams against the updated rules.
Companies managing parallel corporate compliance obligations should also review our guidance on corporate law requirements for foreign entities in Saudi Arabia.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in tax compliance. Reporting obligations. Additionally, regulatory advisory for foreign entities operating in Saudi Arabia and across the Gulf region. Engaging a lawyer in Saudi Arabia with knowledge of both local tax legislation and international treaty practice is essential when the compliance stakes are this high. As an international law firm with a dedicated Middle East practice, Ferraz & Whitmore supports multinationals, institutional investors, and in-house legal teams navigating ZATCA requirements, withholding tax positions, and permanent establishment risk. Our attorneys have advised on tax and corporate matters across civil law and common law systems, and our network includes practitioners with direct experience before Gulf tax authorities. To receive an expert assessment of your Saudi Arabia tax reporting obligations, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.