Tax axe falls on expatriates in Saudi Arabia

Tax axe falls on expatriates in Saudi Arabia
Foreign workers in Saudi Arabia started to contribute for their dependants, as expatriates pay taxes for the first time in many years.
2 min read
06 July, 2017
Expats will have to fork out to keep their families in Saudi Arabia [AFP]

Foreigners working in Saudi Arabia started to pay taxes for dependents this month, as the Gulf state looks at ways to find funds after a sharp drop in oil prices.

The new law applies to expatriates in the private sector who for decades enjoyed tax free living.

Plummeting oil prices in 2014 and a new vision to diversify its resource-reliant economy has led Saudi Arabia to look for new funds, and one of its first targets is its millions of foreign workers. 

Expatriates working in the private sector now must pay 100 riyals ($26.60) per month for every minor or unemployed relative living in Saudi Arabia.

The tax will increase every year until 2020, when it will be capped and with 11 million foreigners working in the private sector and 2.3 million dependants.

Human rights groups have criticised Riyadh for not exempting citizens from war-torn Syria and Yemen from the tax.

"People displaced by war who have no means of subsistence cannot be equal to others coming to the country for tourism, work or studies and who fall under the expats category," Euro Med said, according to Al Jazeera.

"The Kingdom of Saudi Arabia must take into account the humanitarian and living conditions of the newcomers to the kingdom, Syrians and Yemenis in particular, who entered the kingdom in search of safety for them and their children."

Saudi Arabia's ambitious Vision 2030 plan, unveiled in April 2016, aims at radically transforming the oil-reliant country into a more vibrant, business-friendly economy. 

This will include the sale of a five percent stake in state-owned oil giant Aramco at between $2 trillion and $2.5 trillion.

GCC countries aim at introducing VAT in the coming years, although it is not clear how the Qatar-Saudi dispute could affect this. 

Saudi Arabia and other Gulf states also introduced a "sin tax" with a huge increase in consumer prices for cigarettes and fizzy drinks.

Agencies contributed to this story.