WHT on Insurance and Reinsurance Premiums in Saudi Arabia

Insurance and reinsurance premiums paid to non-residents are subject to 5% WHT on the gross premium amount. The Saudi policyholder withholds 5% before remitting the net premium to the non-resident insurer or reinsurer.

This obligation applies wherever Saudi-source insurance income arises — regardless of whether the insurance contract is written in Saudi Arabia or abroad, and regardless of where the insurer is domiciled. The source of the income (Saudi risk, Saudi insured asset, or Saudi activity) is what creates the WHT obligation, not the location of the policy documentation or payment processing.

Insurance is specifically a high-volume WHT category for large Saudi industrials, energy companies, and real estate developers who place significant portions of their risk programmes with international insurance markets — particularly London, Europe, and Bermuda. For these entities, WHT on insurance premiums can represent a meaningful annual cash cost if not properly managed.

Under Article 5(2) of the Implementing Regulations, insurance and reinsurance premiums are Saudi-source in any of the following circumstances:

• The insured asset is in Saudi Arabia: Property insurance on a Saudi-located building, equipment, or other asset — the premium is Saudi-source regardless of where the policy is written.
• The insurer is a Saudi resident: Where a Saudi-licensed insurance company reinsures risk with a non-resident reinsurer, the reinsurance premium is Saudi-source.
• The insurance covers Saudi activities or risks: Liability insurance covering a company’s Saudi operations; project insurance on a Saudi construction contract; marine cargo insurance for goods in Saudi waters — all generate Saudi-source premium income.

The third trigger — activities or risks related to Saudi activity — is the broadest and the most commonly applicable. A Saudi company placing a comprehensive property and liability programme with a Bermuda insurer has Saudi-source premiums on the Saudi-risk components of the programme, even if the policy is written offshore.

Reinsurance arrangements create a specific layering question: if a Saudi-licensed insurer writes the primary policy and then reinsures the risk with a non-resident reinsurer, the reinsurance premium paid by the Saudi insurer to the non-resident reinsurer is subject to WHT.

This means that the economic cost of insuring Saudi risks with international reinsurance capacity includes a 5% WHT layer on each reinsurance premium outflow. Saudi insurers who regularly cede risk to Lloyds syndicates, European reinsurers, or Bermuda markets should have established WHT compliance processes for their reinsurance premium payments — monthly statements, proper withholding, and annual returns.

There is an important interaction between the insurance WHT rule and the PE rules. The Saudi Income Tax Implementing Regulations contain a specific provision: a place from which a non-resident conducts insurance or reinsurance activity in Saudi Arabia through any agent is a PE — even if that agent has no authority to negotiate or conclude contracts. This PE rule is broader for insurance than for other activities.

If a non-resident insurer has a Saudi PE (because it operates through a Saudi agent), its Saudi income is subject to CIT on the PE’s profits rather than to final WHT on gross premiums. The WHT mechanism is a final tax designed for non-residents without Saudi presence. Where the insurer has a PE, the CIT regime applies instead. Determining whether a non-resident insurer has a Saudi PE is a prior question that must be answered before deciding whether WHT or CIT applies to its Saudi premium income.

Does WHT apply to the full annual insurance premium or to each instalment?

WHT applies at the point of payment — each time a premium payment (or instalment) is made to the non-resident insurer or reinsurer, 5% must be withheld and remitted within the first 10 days of the following month. Where a premium is paid in annual, quarterly, or monthly instalments, each instalment is a separate WHT event. The monthly WHT statement for each month in which a payment is made must reflect the withholding on that payment.

Does WHT apply to claims recoveries received from a non-resident reinsurer?

No. Claims recoveries are not income from a Saudi source for WHT purposes — they are a recovery of a loss, not a payment for a service or a return on investment. WHT applies to the premium payment flowing from Saudi Arabia to the non-resident, not to the claims payment flowing from the non-resident back to Saudi Arabia.

What if the insurance programme covers both Saudi and non-Saudi risks?

Where an insurance programme covers risks in multiple countries, the WHT applies to the Saudi-risk component of the premium. The Saudi policyholder should work with the insurer to identify and document the allocation of the total premium between Saudi and non-Saudi risk components. The portion of the premium attributable to Saudi risks (Saudi assets, Saudi activities) is subject to 5% WHT; the portion attributable to non-Saudi risks is not. A defensible allocation methodology should be documented and maintained.