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A resident establishment pays interest on a loan provided by a group of banks (resident and non-resident). Meanwhile, the bank that manages the loan (resident or non-resident) collects interest from the resident establishment and distributes it to the group of banks involved in granting the loan. Is this loan interest subject to Withholding Tax?

The interest on the loan paid to the bank that manages the loan is not subject to withholding tax if the establishment in question is a resident. In this case, the establishment is obligated to include such interest in its tax return and file it to be subject to income tax or zakat as the case may be. When the bank that manages the loan pays loan interest to non-resident banks, then it has to deduct the tax from its total amount. If the manager is a non-resident bank, the interest received on the loan is subject to withholding tax.
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Last Update: 04 Sep 2020 06:15 PM Saudi Arabia Time