Saudi Arabia’s expat tax
From July 1st, 2017, expats in Saudi Arabia will have to pay a residence tax and will be affected by a ‘sin tax’ introduced on tobacco and soft drinks. On top of that, companies will have to pay extra taxes for their foreign employees.
How the residence tax will impact expats
From July 2017, expats working in Saudi Arabia will have to pay the government SAR 100 each month, per family member. The costs per family member will increase to SAR 400 by 2020. This tax has to be paid annually on application or renewal of a residence visa.
How it will impact businesses
Companies already have to pay for their expatriate employees, when there are more expats than locals working for the company. They have to pay SAR 200 for each expat that exceeds the number of native workers.
From January 2018, the costs to employ foreigners will increase. If there is an equal or lower number of expats employed compared to Saudi employees, companies will have to pay SAR 300 for each expat. These costs will increase every year, reaching SAR 700 by 2020.
If there are more expats than Saudi employees, companies will have to pay SAR 400 for each expat that exceeds the number of locals employed. This will rise every year to SAR 800 per expat in 2020.
Three weeks ago, on June 10th 2017, the new sin tax was introduced. It enforces a 100% tax on tobacco products and energy drinks, and a 50% tax on soft drinks. This means that one can of Coca Cola will go from 2 SAR to 4 SAR. It’s not only done to raise money but also to tackle the increasing problem of diabetes. By doing this, the country will receive between SAR 1.9 billion and SAR 2.4 billion within six months.
A Value Added Tax (VAT) of 5% on goods and services will be implemented in 2018, in line with other Gulf Corporation countries like the United Arab Emirates and Oman.
Saudi Arabia has always been a tax-free environment for expats However, a means to improve their financial situation has become necessary since their oil revenue continues to fall. Taxing their high expat population has been seen as a simple solution to the issue.