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Saudi Arabia introduces new tax levies for expats and companies

Saudi Arabia introduces new tax levies for expats and companies

Saudi Arabia has been a safe haven for most expats from all parts of the world. This is attributed to the tax free policy that the country instituted in the distant past. According to the policy, the expatriates operating within the borders of the country were entitled to free tax on their income along with access to most utilities at subsidized prices.
But, the story started changing by the end of 2016. In December last year, the country slashed subsidies on water and electricity leading the price of the utilities to go up by 30 %. The cost of other utilities and commodities may also go up further than 30 % when the government enforces the new VAT starting from January.
The 2017 budget for Saudi Arabia brings to light a number of surprises which have shocked masses, especially the expats and companies which operate within the borders of the country. This follows the recent announcement of the introduction of a levy for all expats that have dependents. Starting from July 2017, all expats with dependents will be required to pay a levy fee.
This is what sent shockwaves across the country’s community of expatriates. The levy dubbed ‘Family Tax’, which came into effect on the 1st of July, was proposed by government officials and was recently approved for inclusion in the 2017 budget. This comes after the country’s oil revenue declined following the reduction in oil prices and the recent extension of the global oil production cut.
According to the budgetary reports, expats will be expected to pay 100 Saudi riyals for every dependent starting from July. The fee is expected to be doubled in 2018 as expats will be required to pay 200 Saudi riyals for every dependent. Further information from the tax report indicated that the fee will be tripled and quadrupled in 2020. This means that expats will be required to 400 Saudi riyals by the year2020.
The collection of the fee is scheduled to take place every year at the time of renewal of the resident permit, locally referred to as Iqama. Collection of the fee will be done by the department of passports.
The new tax policy just means that an expat living in the kingdom with a wife and two children will be required to pay up to 3600 Saudi Raiyals at the time of the renewal of the resident permit provided he intends to continue living with them.
Expats are not likely to expect any sympathy from their employers who are already burned with many taxes. In particular, they are required to pay hefty fees on account of giving jobs to employees. The government recently introduced a fee of 200 Saudi Riyals to be paid by all companies that have more expats than Saudis. This fee is to be paid on a monthly basis. In 2018, the same fee will be doubled and later tripled in 2019. Its introduction came when the ministry of labor announced a program dubbed naturalization of the work force.

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