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May 15, 2026

This ZATCA guide clarifies the domestic tax treatment for cross-border software payments under the KSA Income Tax Law. It provides ZATCA's official position on classifying income from various transactions, including copyright transfers, licensing, distribution, and software development. The guide categorises payments as royalties, capital gains, commercial profits, or technical services to determine the correct withholding tax (WHT) application. It analyses numerous transaction types with practical examples, offering crucial guidance for non-residents receiving payments from KSA, ensuring compliance with domestic regulations rather than Double Taxation Agreements (DTAs).

Taxation of Software Payments in the context of domestic Income Tax Law

Version 1

January 2024

1. Introduction

2. Situational context

3. The different types of transactions which could initiate software-related payments

3.3.1 Payments for the alienation/transfer of the full ownership of the copyright on the software
1. 3.3.1.1. Overview of the transaction
2. 3.3.1.2 Practical Example
3.3.2 Payments for the alienation/transfer of part of the rights in the copyright that do not constitute a distinct and specific property
1. 3.3.2.1. Overview of the transaction
2. 3.3.2.2. Practical Example
3.3.3 Payments for distribution arrangements in which the transferee acquires the right to make multiple copies of the program and distribute them in the market
1. 3.3.3.1. Overview of the transaction
2. 3.3.3.2. Practical Example
3.3.4 Payments for information concerning industrial, commercial or scientific knowledge (e.g., access to source code)
1. 3.3.4.1. Overview of the transaction
2. 3.3.4.2. Practical Example
3.3.5 Payments for transactions in which the transferee acquires the right to make multiple copies of the program only for operation within its own business (site, enterprise, or network license)
1. 3.3.5.1. Overview of the transaction
2. 3.3.5.2. Practical Example
3.3.6 Payments for distribution arrangements in which the transferee acquires the right to distribute copies of the program without the right to reproduce the program
1. 3.3.6.1. Overview of the transaction
2. 3.3.6.2. Practical Example
3.3.7 Development of software for a fee
1. 3.3.7.1. Overview of the transaction
2. 3.3.7.2. Practical Example
3.3.8 Payments for access to an online database
1. 3.3.8.1. Overview of the transaction
2. 3.3.8.2. Practical Example
3.3.9 Mixed contracts (e.g., provision of goods and sources)
1. 3.3.9.1. Overview of the transaction
2. 3.3.9.2. Practical Example
3.3.10 Payments for the alienation/transfer of part of the rights in the copyright that constitute a distinct and specific property
1. 3.3.10.1. Overview of the transaction
2. 3.3.10.2. Practical Example
3.3.11 Payments for transactions where the rights acquired are limited to those necessary to enable the business user to operate the program
1. 3.3.11.1. Overview of the transaction
2. 3.3.11.2. Practical Example

4. Appendix: Overview of all transactions covered in this Guideline and their classification

The Zakat, Tax and Customs Authority ("ZATCA, "Authority) has issued this Tax Guideline for the purpose of clarifying certain tax treatments concerning the implementation of the statutory provisions in force as of the Guideline's issue date. The content of this Guideline shall not be considered as an amendment to any of the provisions of the Laws and Regulations applicable in the Kingdom.

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