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Expatriate income tax could be 10%

Saudi Arabia’s Shoura Council is debating legislation that will impose an expat income tax of 10%, much higher than originally thought.

Saudi Arabia’s Shoura (Consultative) Council surprised everyone when it announced yesterday that a proposed expatriate income tax will be set at 10%. The tax will apply to earnings over SR3,000 ($800.)

Earlier reports indicated that a rate of 2.5% would be set and many analysts were not even convinced that the proposal would be pushed through. However, the draft legislation has been approved by the Shoura and will now be sent to the council’s finance committee for modification, according to the Arab News newspaper. The bill will return for a final vote and will then be sent to the government for approval.

According to one Riyadh businessman, the business community has not been consulted about the legislation and its implications.

“We are living in a world of intense competition,” Abdul Rahman Al-Jeraisy told Okaz newspaper. “A number of neighbouring countries provide various incentives to foreign investors to attract capital and technology. In my opinion, the introduction of this tax will definitely have a negative impact on the investment the Kingdom attracts from outside.”

An estimated five million expatriates work in Saudi Arabia’s private sector, with a large proportion earning salaries below the $800 taxable threshold.

Perhaps in an attempt to offset any negative impact of the income tax, authorities have also been contemplating a reduction in the tax on foreign companies operating in the Kingdom. A reduction to 30% from the current 45% is being mooted.

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