Expats in Saudi face threat of income tax

Published:  4 Aug at 6 PM
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Tagged: USA, Australia, UAE, Jobs
Saudi Arabia’s controversial National Transformation Plan is set to cause problems for mid and upper level expat professionals due to the introduction of income tax.

Saudi’s tax-free status has been a major draw for expat professionals over the years, allowing them to save as well as spend in the popular relocation hub. However, unpleasant changes are underfoot, and may result in the introduction of income tax for foreign workers.

The National Transformation Plan is being brought in to counter the devastating effect of the fall in oil prices from around $100 a barrel to a recent low of $30. As a result, the Saudi economy has taken a huge hit, with companies having difficulties paying their low-waged workers, construction slowing down and tens of thousands of foreign workers losing their jobs and the right to stay in the kingdom. From last year’s economic growth factor of 3.4 per cent, this year’s figure is expected to be 1.5 per cent at best.

The author of the plan, Deputy Crown Prince Mohammed bin Salman, has slashed subsidies on fuel and utilities and is proposing cuts to the wages bill of the entire public sector. In addition to introducing the proposed income tax for expat professionals, Saudi Arabia is joining with Bahrain, Kuwait, Oman , Qater and the UAE in a joint effort to bring in Value Added Tax.The start date is expected to be some time in 2018, with social services, healthcare and a selection of foods exempted from the charge.

The moves on tax in general are expected to significantly reduce dependency on oil industry revenues. Discussions are continuing regarding the introduction of income tax for the millions of foreign workers in the Gulf states, as it’s feared expat professionals may avoid jobs in the region or, if already employed, leave for more tax-friendly locations. Whilst another aim, especially in Saudi Arabia, is to provide more jobs for nationals, it’s felt that overseas investments in the kingdom may also fall victim to a change in the tax status.
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