Saudi business community seeks expat levy amendments

The law is intended to help the kingdom achieve Saudisation targets.
Sunday 25/02/2018
People stand outside jewellery stores in Riyadh. (Reuters)
Evolving taxation. People stand outside jewellery stores in Riyadh. (Reuters)

LONDON - The Council of Saudi Chambers (CSC), reacting to a backlash, recommended changing the recently introduced expat levy.

The Saudi daily Al Madina reported that businessmen and the heads of Saudi chambers of commerce asked for amendments to the expat levy during a meeting with Minister of Labour and Social Development Ali bin Nasser al-Ghafis.

The CSC recommendations included adjusting the timeline of payment increases from 2020 to 2025 and possibly exempting micro, small and medium-sized businesses from the tax for a few years. Only Saudi firms with five or fewer employees are exempt from the tax.

Ghafis agreed to put together a task force that includes members of the Labour Ministry and the CSC to study the proposals.

The expat levy law, which went into effect in January, requires companies in which foreign workers outnumber Saudis to pay a monthly fee of approximately $107 per expat employee. Firms employing an equal number of Saudi and expat employees must pay a monthly rate of $80 per expat. Companies with a larger foreign workforce will be forced to pay $160 per expat worker starting 2019, with that rate going up to just more than $213 in 2020.

In cases in which the number of foreign and Saudi employees are the same, the expat levy will increase to $133 in 2019 and approximately $187 in 2020.

The law is intended to help the kingdom achieve Saudisation targets. The kingdom announced that certain would be off-limits to expatriates. The decision, which goes into effect in September, will see expats barred from working in 12 retail jobs, including in watch shops, medical equipment stores and pastry shops.

Thamer al-Farshouti, head of the Jeddah Chamber of Commerce and Industry’s (JCCI) Entrepreneurship Committee, said that up to 30% of private business establishments could close if the current policies remained unchanged. A JCCI report stated that 15% of establishments in Jeddah are on the verge of closure, with 11% facing major financial burdens due to current policies. The report recommended the cancellation of the expat tax on firms with the same number of Saudi and expatriate workers, the Saudi daily Okaz reported.

In January, a 5% value added tax (VAT) took effect in Saudi Arabia and the United Arab Emirates. Other Gulf Cooperation Council countries were to follow suit later in the year and in 2019.

The VAT basically ended the tax-free lifestyles the two countries’ populations were accustomed to. However, a week into the new year Saudi King Salman bin Abdulaziz Al Saud issued royal decrees authorising a wide range of bonuses and payouts for Saudi citizens to “ease the burdens” tied to the tax, an official statement said.

The kingdom’s cabinet has approved bankruptcy laws for the first time but the framework for that process is yet to be made public.