RIYADH, 6 May — The Shoura (Consultative) Council approved yesterday a draft legislation requiring foreigners to pay 10 percent of their monthly salary in income tax, a council member said.
“The draft legislation stipulates levying a 10 percent tax on monthly earnings exceeding SR3,000 ($800),” Mohammad Al-Qunaibet said.
It applies to all foreigners except nationals of countries with which Saudi Arabia has agreements to prevent double taxation, Qunaibet explained.
The advisory body passed the draft tax legislation in principle a few weeks ago and yesterday completed a debate on its 75 articles and approved them, secretary-general of the council Hamoud Al-Bader said.
It then sent the bill back to the council’s finance committee to formulate the articles in light of comments made by the 120 members of the house. The bill will return for a final vote very soon, Bader added.
The bill will come into effect only after it is approved by the government, as under Saudi law the council can only make recommendations to the government, which has the sole power to issue new laws.
Abdul Rahman Al-Jeraisy, a prominent businessman based in Riyadh, expressed surprise at how the move to impose income tax had been undertaken before the views of businessmen had been taken into consideration.
“We are living in a world of intense competition. A number of neighboring countries provide 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 outside,” he told Okaz daily.
Abdul Aziz Kanoo, another businessman, said he believed that the government would not impose the new tax without examining the negative economic consequences.
An American expatriate based in Riyadh told Arab News yesterday evening: “In any other country, those who pay income tax get services in return. Expats are not here for the sun — we have to make many sacrifices. The carrot has always been a tax-free income.
The most important thing now is that we are told very quickly if this is going to affect our ESB payments. Most of the Westerners I spoke to this evening have said they will leave if it does.”
A British expatriate in Jeddah said: “I’m glad now that we will all become stakeholders in the Saudi economy. We’re no longer here for a free ride — and as a result, we’ll be demanding better services.”
The 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.
Around seven million expatriates live in Saudi Arabia, five million of whom work 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 lure the billions of dollars in 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.
