RIYADH, 22 September — The Shoura Council is expected to review the proposed income tax for expatriates within a few days, a high-level source told Arab News.
The source said the council had not yet reached a conclusive decision on the rate of tax to be imposed.
The Shoura’s Finance Committee has been studying the proposal over the past three months. The panel would present its views to the 120-member consultative body shortly to discuss its articles one by one and pass them through voting. The Shoura might take a long time to approve the final draft legislation.
In May, the Shoura approved a draft legislation requiring foreigners to pay 10 percent of their monthly salary in income tax. "The legislation stipulates levying a 10 percent tax on monthly earnings exceeding SR3,000 ($800)," said Mohammed Al-Qunaibet, a Shoura member.
If a draft bill to levy 10 percent income tax on the earnings of foreigners becomes law, it is expected to net around SR6 billion ($1.6 billion) for the state coffers, according to Abdul Wahab Abu-Dahesh, senior economist at Riyad Bank.
Al-Qunaibet, head of the council’s economic affairs committee, explained that there has been no final approval of the 10 percent figure. "The 10 percent has been proposed by the finance committee, but the council has not determined as yet a specific percentage," Qunaibet said.
The new law would be applied to all foreigners except nationals of countries with which Saudi Arabia has agreements to prevent double taxation.
The source said the finance committee would review the 75 articles of the law again in the light of comments made by the Shoura members. The bill will take effect only after the government’s approval, as under Saudi law the Shoura can only make recommendations.
"A majority of the Shoura members should approve the draft legislation before it is presented to the prime minister for endorsement," the source told Arab News.
The latest review of the tax legislation comes after objections raised by Saudi businessmen. Abdul Rahman Al-Jeraisy, president of the Council of Saudi Chambers of Commerce and Industry, has said that the tax move was initiated before businessmen’s views were taken into consideration.
"We are living in a world of intense competition. A number of neighboring countries provides 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 the outside," he told Okaz daily.
Abdul Aziz Kanoo, another businessman, said he believed the government would not impose tax without examining the negative economic consequences.
Businessman Khaled Al-Juffali and Dr. Majed Al-Qassabi, secretary-general of the Jeddah Chamber of Commerce and Industry, suggested that the rate of income tax be kept at the lowest possible level so as not to affect capital inflow. The proposed legislation is an amendment of a law issued 50 years ago stipulating that foreigners working in the Kingdom should pay income tax. That law was never implemented.
About six million expatriates live in Saudi Arabia, five million of whom working in the private sector. Unofficial figures indicate that foreigners remit around $18 billion to their countries annually.
The new legislation also aims to reduce taxes from 45 to 30 percent on the profits of foreign companies in an effort to attract foreign investment required to boost the Saudi economy.
Gulf Arab nationals and companies are exempt from the proposed law because they, like their Saudi counterparts, already pay zakah, which works out to 2.5 percent of a firm’s annual turnover. The rules of the bill apply to foreign partners of joint ventures in the Kingdom.
