RIYADH, 29 April — Saudi Arabia could soon levy an income tax on expatriate workers earning SR3,000 ($800) or more a month, the Shoura Council’s secretary-general said yesterday.
Draft tax legislation under study by the advisory body “applies to earnings of company employees exceeding SR3,000 riyals a month,” Dr. Hmoud Al-Badr told the Saudi Press Agency.
Badr did not specify how much income tax foreigners would pay, but press reports have suggested it would be 2.5 percent of a monthly salary.
The Shoura is likely to approve the legislation within the next two weeks.
But under Saudi law, the council can only make recommendations to the Council of Ministers, which has the final power to issue new laws.
The legislation is a modification of a tax bill issued 50 years ago stipulating that foreigners working in the Kingdom should pay income tax, but it was never implemented.
Around seven million expatriates live and work in Saudi Arabia, with five million of them in the private sector.
Unofficial figures indicate 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 lure billions of dollars in foreign investment required to boost the Saudi economy.
Finance and National Economy Minister Dr. Ibrahim Al-Assaf has ruled out imposing income tax on Saudi citizens or companies, but the measure will be extended to joint ventures. Saudi companies already pay zakah, which works out to 2.5 percent of a Saudi firm’s annual turnover.
Yesterday’s Shoura meeting, which was presided over by its President Dr. Saleh ibn Humaid, discussed a number of articles of the new taxation law.
Referring to taxation of companies owned by individuals, Badr said the tax will be applied on the partners, not on the company.
“The proposed income tax will not exceed the rate of zakah, which is 2.5 percent of the earnings, and may be even lower,” a Saudi Arabic daily quoted a high-level source in the Shoura Council as saying. “The Shoura is currently reviewing a draft law on income tax which will be officially endorsed within a period not exceeding seven months,” the source told Al-Yaum daily.
Abdul Rahman Al-Jaafary, head of the Shoura’s financial committee, said the proposed tax rate would “not be high” and that in some cases it would be less than the 2.5 percent zakah that Saudis pay annually.
