Saudi Expats Warn Over Investment Consequences Of Income Tax Plans

by Philip Morton, Investors Offshore.com

08 May 2002

The Saudi Arabian Shoura Council announced on Sunday that it has approved draft legislation requiring foreign workers to pay income taxes at a rate of 10% of their monthly salary.

The new tax, if approved by the government, will apply to earnings of over SR3,000 ($800), and will be levied on all foreign nationals working in the region, with the exception of those from countries with which Saudi has a double taxation agreement.

Feelings were mixed among the expatriate community following the consultative council's announcemrnt, with some foreign workers welcoming the opportunity to contribute to the economy and benefit from improved services, and others threatening to leave the country if the tax - which is higher than media estimates of 2.5% of monthly salary - is imposed.

Speaking to the Zawya news service earlier this week, one prominent Riyadh-based businessman predicted dire consequences for the jurisdiction's competitiveness on an international level, arguing that:

'We are living in a world of intense competition. A number of neighbouring 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.'

Another US expat observed wryly in the Arab News on Sunday that: 'Expats are not here for the sun - we have to make many sacrifices,' adding that: 'The carrot has always been a tax-free income.'

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