Taxing expats under spotlight

The long pending issue of imposing income tax on foreigners would come up again for discussion at the Shoura Council on Sunday. The finance committee of the Shoura has recommended carrying out fresh studies on imposing tax on all foreigners working in both public and private sectors in the Kingdom, Al-Riyadh newspaper reported yesterday.

The new proposal was made by Muhammad Al-Quwaihes, member of the Shoura, who presented it as an additional recommendation attached to the annual report of the Department of Zakat and Income Tax, which had already been discussed by the Shoura.

According to Al-Quwaihes, levying income tax on foreigners would be helpful in further boosting the ongoing Saudization drive. “Foreigners working in the Kingdom transfer about SR100 billion to their countries of origin annually.

The government is neither levying a single riyal in tax or Zakat on their remittance nor do they need to pay any kind of taxes,” he said.

Al-Quwaihes noted that most of the countries in the world impose income tax on individuals who work and earn money in those countries. “It is high time to impose income tax on foreigners. It is also to be noted that foreign workers are beneficiaries of all government support and subsidies given to utility services and products such as water, electricity, wheat, and petroleum products,” he said.

Nearly a decade ago, the Shoura Council reviewed the possibility of imposing taxes on foreign workers but later the proposal was put on the shelf. There are eight million foreigners in the Kingdom, an overwhelming majority of them working in the private sector.

Both Saudi and expatriate employees working in the Kingdom had to pay income tax until it was abolished in 1975. Later, there were moves to reintroduce income tax on foreigners in late 80s. However, in 1988, King Fahd scrapped the plans.

At present, only Saudi citizens and Saudi companies need to pay Zakat of 2.5 percent annually on profits and on the assessable amount for individuals, in addition to a 45 percent tax on foreign investors.

In a bid to attract more foreign investment into the Kingdom, the government slashed, in 2004, the tax rate imposed on foreign investors from 45 to 20 percent.