RIYADH, 11 January 2003 — The proposed law for levying income tax on expatriate workers and foreign companies will be returned to the consultative Shoura Council for approval within a few weeks after modifications, high-level sources revealed yesterday.
The 120-member Shoura had sent the law to the financial committee to make alterations in accordance with observations made by its members.
The sources said the new bill, with more than 50 articles, will identify the individuals and companies that are required to pay income tax.
According to Mohammed Al-Qunaibet, a Shoura member, the consultative body approved the draft law last May requiring foreigners to pay 10 percent of their monthly salary in income tax.
“The draft legislation stipulates levying a 10 percent tax on monthly earnings exceeding SR3,000 ($800),” he said.
It applies to all foreigners except citizens of countries with which the Kingdom has agreements to avoid double taxation, Qunaibet explained.
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 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 foreigners remit around SR70 billion ($18.7 billion) to their countries annually.
The goal for the move is to generate more income for the Kingdom which is struggling to recover from deficit budgets for the last several years.
The new legislation also aims to reduce taxes on the profits of foreign companies in an effort to lure foreign investment.
The rules of the bill apply to foreign partners of joint ventures in the Kingdom.
Gulf Arab nationals and companies are exempt from the proposed law because they, like Saudi counterparts, already pay zakah, which works out to 2.5 percent of a firm’s annual turnover.
