What is withholding tax?

Withholding tax is tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and are typically used in respect of dividends, interest, royalties and similar payments.
Withholding tax is the building block of a special type of tax regime which is called Final Tax Regime (FTR), which is also known as Presumptive Tax Regime (PTR). While UAE CT law is not likely to have FTR, it is likely to have withholding tax deducted on certain payments such as payment to foreign vendors. The organization that deducts tax at source is referred to as “Withholding Tax Agent” and is subject to rules as stipulated by the revenue authority of the country in question.