RIYADH, 5 April 2003 — The Shoura Council is expected to discuss tomorrow a proposal to cut income tax on foreign companies based in the Kingdom. The move was designed to attract more foreign investment.
Informed sources told Arab News that the revised law on income tax will be presented to the Shoura again by the Financial Affairs Committee after articles related to taxing expatriate workers have been deleted.
The sources said the rate of tax to be imposed on foreign companies will be much less than the present one, but did not specify how much tax cut the Shoura would propose.
At present, the government imposes a tax rate of 45 percent on the profits of foreign companies and foreign partners of joint ventures.
Finance and National Economy Minister Dr. Ibrahim Al-Assaf has said that the revised corporate taxation law was seeking to cut the tax to 30 percent.
The Shoura Council canceled the plan to impose income tax on the country’s seven million expatriate workers during a session held in January this year. The decision was taken with a majority of 73 members voting against the proposal.
The sources said the 120-member consultative body took the decision thinking that taxation will lead to the flight of qualified expatriate workers — especially those in the health and education sectors — from the country.
Expatriate workers in the Kingdom breathed a collective sigh of relief at the news of the bill’s rejection. Saudi businessmen also welcomed the decision as a “wise move.”
The new corporate tax law has 50 articles. Shoura sources said the law will encourage foreign companies to invest in the Kingdom. The Department of Zakah and Revenues will collect tax from foreign companies.
The law will come into effect only after it is approved by the Cabinet, as under the Saudi law the council can only make recommendations to the government. The legislation is an amendment of a law issued 50 years ago.
Although the Shoura Council has a strictly advisory role, the decisions it makes have far-reaching implications because they are studied in great detail by the government.
