Saudi Arabia plans to tax expat wages

Published:  8 Jun at 6 PM
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Continuing the hunt for extra revenue to offset the fall in oil prices, Saudi Arabia is considering taxing foreign residents’ salaries.

The introduction of income tax for foreign residents as yet another way to increase falling revenue streams is bound to be controversial, and is at present being considered as ‘only a proposal’, according to the Saudi Finance Minister. The story broke as part of a Jeddah-based news conference, during which FM Ibrahim al-Assaf said the initiative is up for discussion with nothing decided as yet.

However, given the recent massive shake-up of the Saudi economy as announced by Deputy Crown Prince Mohammed bin Salman, it’s logical that hitting on expats working in the country is a favourite for increasing the massive revenue losses. In Jeddah, Assaf reiterated the government promise to balance the budget within the next four years, adding that there were no plans to impose income tax on Saudi citizens.

The plan has already found favour with finance chiefs, who believe expats should be encouraged to spend more and save less whilst working in the country.The tax is expected to start at 6 per cent in its first year, reducing to 2 per cent for the fifth and subsequent years. According to the World Bank, total remittances to their home countries from expat workers in Saudi are the second highest in the world.

Meanwhile, the bad news continues in Abu Dhabi via an official survey assessing the effects of introducing VAT in the UAE. Local investment and finance specialists note that higher inflation would follow any introduction of VAT, adding that demand for luxury goods and top of the range vehicles is likely to drop significantly. Healthcare, they add, would be the least-affected sector.

On the subject of income tax in the UAE, survey results were as expected, with 80 per cent of respondents stating they would consider moving overseas should it be introduced. A further 59 per cent said the present tax-free status had been a strong factor in their decision to move to the region.
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