No VAT on expat remittances in Saudi Arabia, say bankers

Updated 18 December 2017

No VAT on expat remittances in Saudi Arabia, say bankers

RIYADH: Senior bankers clarified on Sunday that money sent home by expatriate workers will not be taxed under the value-added tax (VAT) reform initiative to be launched by the Saudi government on Jan. 1 next year.
It was also announced that companies and businesses have only three days left to register and obtain their dedicated VAT account numbers.
Saudi Arabia’s General Authority for Zakat and Income Tax (GAZT) has urged businesses with annual revenues of more than SR1 million ($266,640) to register for VAT before the deadline of Dec. 20, 2017.
“The deadlines for companies with annual revenues between SR1 million and SR375,000, however, has been extended by a year until Dec. 20, 2018,” according to a GAZT statement.
“All businesses including commercial organizations and banks have been advised to make sure they understand the VAT rules and be ready for their implementation after 15 days from now,” said Syed Ahmed Ziauddin, a senior banker who heads the financial institutions and public sector group at Bank Al-Jazirah in Riyadh.
He said: “Aljazirah Bank is fully ready to start from Jan. 1 ... and we are going to apply VAT on our service charges.”
He said that all commercial banks have geared themselves to comply with the VAT regulations. “The banks have also educated their customers about VAT besides advising them about various services that will come under the purview of VAT,” said Ziauddin, while adding that the remittances will not be taxed under the VAT system.
“Money remittance outflows will be exempted,” said Abdullah Ali Nasser Alfuraiji, chief of the Tahweel Al-Rajhi in Riyadh. Alfuraiji made it clear that “the 5 percent VAT tax would be levied on the remittance service fees, rather than the remittances themselves.
He emphasized that “Tahweel will be charging 5 percent of SR18, which we charge as remittance fee for sending funds to India. Hence, the rise will be nominal with customers required to pay 9 halalas extra for remitting money to India.”
The Tahweel chief added that this will be negligible, but will differ from country to country.
Referring to the implementation of the VAT and the levies imposed on remittances, Ahmed Mohammed Al Enazi, general manager of Enjaz Banking Services, the remittance arm of Bank Albilad, said: “There will not be any impact on remittances.” He also confirmed that “5 percent VAT will be imposed on service charges... say like 5 percent of SR16 in case of India and 5 percent of SR20 in case of Pakistan.”
“The 5 percent on banks’ service fees will be paid by the person sending money as per guidelines of the General Authority of Zakat and Tax (GAZT),” said Ahmed.
Banks and remittance centers in the Kingdom charge varying fees on remittances sent to different Asian and European countries.
The imposition of 5 percent VAT “on service charges, not on remittance amounts” was also confirmed by Anwar Ahmed Wajid Khajja, manager of products and partners at Fawri, the remittance wing of Bank Aljazirah in Riyadh.
Referring to the benefits of VAT especially those collected by banks and remittance centers, Cenon Nonie C. Sagadal Jr., marketing representative of Rizal Commercial Banking Corporation (RCBC) of the Philippines, said: “VAT is a welcome move with a slight increase in remittance fees, which will eventually benefit the remitters and the institutions.
“With the government meeting its financial goals as a result of VAT collection, more employment opportunities will be created not only for Saudis but also for expatriates within the framework of the Saudi Vision 2030.”


Saudi Aramco IPO may drag real estate prices down

In this file photo taken on November 03, 2019 shows a sign of Saudi Aramco's initial public offering (IPO) during a press conference by the state company in the eastern Saudi Arabian region of Dhahran. (AFP)
Updated 2 min 57 sec ago

Saudi Aramco IPO may drag real estate prices down

  • Saudi Arabia’s economy has ‘entered a new stage’

JEDDAH: The long-awaited initial public offering (IPO) for Aramco is expected to attract Saudi individuals and investors thanks to encouraging locals to invest in the giant company.
Each Saudi will be entitled to one free share for every 10 shares, provided that they do not dispose of the shares for 180 days from the date of listing. The number of shares for each Saudi investor shall not exceed 100.
Jamal Bennoun, a Saudi columnist who writes on economic issues, told Arab News that the Kingdom’s economy had entered a new stage. This would attract small investors and individuals as well as companies to buy shares from Aramco, especially since millions of shares will be offered by one of three mega-companies in oil and gas in the world.
Bennoun believes that the real estate sector will be the most affected by the IPO since people are looking for liquidity to buy shares and thus land prices are expected to drop. This, he said, would be of benefit to people wanting to buy land or units at less than market price.
Olfat Kabbani, a Saudi businesswomen investing in the downstream sector, and also the deputy head of the industrial committee at Jeddah Chamber of Commerce and Industry, said that the Aramco IPO is the largest economic event in the world now and described it as an important step in the economic reform led by Crown Prince Mohammed bin Salman.
As an investor in the local market, she believes that this move is a great opportunity for Saudi citizens to invest in one of the world’s leading companies in the oil and gas industry. She is optimistic since Aramco confirmed that there will be incentives for the first subscribers and access to free shares.
Through this move the Saudi government has considered citizens as partners in building the economy and is making history by opening up this opportunity, which will diversify the economy, enhance the market and create more job opportunities, she said.
A number of businessmen in Makkah also believe that the Kingdom is going through the most important economic event in its recent years, the media center of the Makkah Chamber of Commerce and Industry (MCCI) reported.
“This event will establish a new history in the evolution of the Saudi economy, enhance the performance of related sectors, improve the financial situation of the citizens, and build a dynamic and diverse Saudi economy within the ambitious Vision 2030,” the businessmen said.

Through this move the Saudi government has considered citizens as partners in building the economy.

Olfat Kabbani Saudi businesswoman

Hisham bin Mohammed Kaaki, MCCI chairman of the board of directors, explained that Aramco’s plan to sell part of its shares in local and international markets will give the Saudi economic sector greater transparency and will contribute to fighting corruption as Aramco is one of the most profitable companies in the world.
He said that the Kingdom was ranked first globally in the number of reforms and development processes and stood out as one of the most progressing countries as per a World Bank report, spearheading 190 countries. He said that this reflected the achievements of Vision 2030.
Nayef Meshal Al-Zaidi, MCCI deputy chairman, said: “It is an established fact that Saudi Aramco is the world’s largest integrated energy and chemical company. It produces about one in every eight barrels of crude oil produced globally. It also operates on the most reliable operational system, making this initial public offering a great opportunity for a safe subscription for shares.”
He said that the world is considering Aramco’s IPO with the intention to advance toward safe investment. “The company’s IPO at this time will be effective in attracting global funds to invest in the safe Kingdom, and this will silence those who are poisoning the world’s ears. The world today races to buy shares of the world’s biggest energy company, Saudi Aramco,” he said.
Marwan Abbas Shaaban, MCCI deputy chairman, stressed that “the IPO is a great opportunity for the Kingdom to offer safe investment on a silver platter by placing the Saudi jewel, Saudi Aramco, in the hands of its people to make direct profits.”
“Many sectors will benefit from this scheme and its impact on the public scene is visible,” he said. “The biggest beneficiary will be the Saudi economy and the financial market, which will undoubtedly double in size. The IPO will also increase the overall investment rate in the Kingdom, therefore contributing to the achievement of Vision 2030, which seeks to reach a prosperous economy that benefits Saudi citizens and create a thriving society.”
Ibrahim Bardisi, MCCI secretary-general, thanked the Saudi leadership for their directives. “Whoever misses the IPO train has missed a lot of good that he deserves more than others, especially as the company is determined to continue to provide value to its customers, partners and major shareholder, including the Saudi government and the new shareholders,” he said.
“The benefits of listing on the Saudi market will create added value in this market and attract foreign money to invest in a company the size of Aramco, which is worth $2 trillion, manages oil reserves estimated at more than 265 billion barrels (15 percent of the world’s reserves) and gas reserves of 288 trillion cubic feet, and employs about 65,000 employees.”