CIRCULAR NO. (3227/19) DATED 06/09/1431H
(23/05/2010)

With respect to circular No. 19/ 3227 dated 09/06/1431H (23/05/2010) on DTATs; DTATs determine the withholding tax rates on payments made by a resident of the Kingdom to a beneficiary who is a resident of the other contracting state ("Other State"). Such payments include dividends, royalties and income from debt claims (interest). In certain cases, the withholding tax rates under DTATs may be lower than the default rates stated in the income tax legislation. Upon a DTAT's entry into force, the General Authority of Zakat and Tax ("GAZT" or the "Authority") receives queries regard- ing the applicable tax rates under the DTAT, and eligibility to claim a refund from the Authority in the event tax is withheld at the higher statutory higher rate than that afforded under the DTAT.

In an effort to uniform the Authority's practices with respect to the implementation of DTATs, it is the Authority's position that where a payment is made from a resident of the Kingdom to a nonresident subject to withholding tax pursuant to the income tax legislation and the relevant, the following procedures shall be applied

1. The resident payor obligated to withhold tax from payments to a nonresident (the "Withholding Payor") shall deduct the tax due on such payment and remit it to the Authority in accordance with with the provisions and rates stated in the income tax law.

2. Where a payee [beneficiary of a payment] ("Payee") is entitled to an exemption or reduction of the statutory withholding tax rate under the applicable DTAT, in order to claim a refund of the withheld tax paid to the Authority, the Withholding Payor must submit a letter to the Authority requesting the refund along with the following attachments:

   1. A letter from the Payee who is a resident in the Kingdom's counterparty to the

      DTAT requesting a refund of the excess tax amounts paid.

   2. A certificate issued from the tax administration of the Other State in which the Pee is a resident confirming that the Payee is a resident therein as per Article (4) of the DTAT and that the payment received is subject to tax in the Other State.

   3. A copy of the withholding tax return relating to the tax paid to the Authority and a receipt evidencing remittance of the tax to the Authority.

3. Upon receiving of the above-mentioned items and verifying that the nonresident satisfies the requirements of the DTAT and is thus eligible to obtains the benefit afforded under the DTAT, the Authority shall refund the tax paid in excess in accordance with the procedures set forth in Circular No. 3324/9 dated 16/06/1427H (12/07/2006).