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  • Sunburnt: the advent and likely impact of Saudi Arabia’s expat tax

    16 June 2017

    Angela Wood

    Saudia Arabia expat tax

    A single glance across the parking bays in certain parts of West London provides ample illustration that the economic boom of recent decades has been felt by individuals living in many Middle Eastern states.

    The benefits, though, have not been confined to the citizens of Gulf states but to the thousands of foreign workers who have played their part in helping develop the infrastructure which has allowed the likes of Saudi Arabia and Qatar to profit from, among other things, tourism and a wealth of natural resources.

    For many years, the potential of earning handsome salaries without the kind of income taxes demanded of peers at home has persuaded many Britons to move.

    However, is all that about to change?

    From next month, expats living and working in Saudi Arabia will be subject to a tax of 100 riyals per month – a sum equivalent to approximately £21 – for every one of their dependents.

    The amounts will have to be paid annually when resident visas are either being sought for the first time or renewed. That’s not all, for the expat tax will quadruple between July this year and 2020.

    It’s one part of a shift which has also seen the Saudi authorities levying an excise tax – dubbed a ‘sin tax’ – on items such as fizzy drinks and tobacco which are regarded as damaging to people’s health.

    In addition, Saudi Arabia is one of a number of signatories in the region (including Dubai) to a framework which will see VAT introduced from next year. Counterparts in Abu Dhabi have also put in place a new three per cent ‘municipality tax’ on the rent of foreign nationals which has been backdated to February last year.

    That approach is due to the need to move away from a reliance on declining reserves of oil and gas which, commentators have suggested, could net Saudi Arabia £14 billion in the next three years.

    Not surprisingly, the prospect of taxation has led expat staff and the companies which employ them to question the merits of their remaining in the Gulf.

    The effects have already been felt by businesses employing more foreigners than Saudis, for instance. They need to pay £40 each month for every expat on their books.

    Whilst some observers have forecast that the advent of taxation will impair and not reinforce economic stability in the region, the personal consequences cannot be ignored by British staff regardless of whether they choose to stay put or return home.

    There’s little doubt that HMRC, which is currently flexing its muscles with individuals and commercial organisations, will be scrutinising the affairs of those repatriating assets amassed from working in the Emirates.

    Myself and my colleagues at Enterprise Tax Consultants have already been advising a number of expats anxious to ensure that their affairs are in order before moving back to Britain.

    Without taking similar steps, there is every possibility that like many a tourist who has overindulged in a summer sunshine holiday, a spell among the expats in the Gulf could leave some feeling burned and sore.

    If you have any queries over the Saudia Arabia expat tax, or any other matters, then please do contact us.