Tax on expat remittances proposed by Saudi authorities

Author: PM editorial | Date: 10 Aug 2016

Government aims to raise revenue by tightening the rules on employees sending money abroad

The government of Saudi Arabia is considering plans to impose a tax of up to six per cent on remittances sent out of the country by its large expatriate population.
Such remittances may also be limited to a percentage of how much someone earns, as the kingdom looks for new ways to raise revenue in the face of a depressed oil price.
By tightening the rules on money leaving KSA, the government hopes that more wealth will stay in circulation within the country. But the plans could have an impact on the lives of millions of expats living and working there.
The authorities will use information from back accounts to compare expats’ remittances to their salary. This will also help crack down on tax avoidance and undeclared income, where individuals earn money beyond their official salary and send the extra back to their home country.
Tougher sanctions for tax evasion have been discussed, with Gulf News reporting: “The penalties would be equal to the tax levied for the first offence and doubled for every repeat violation.”
In December, the World Bank ranked Saudi Arabia as the world’s second largest remittance source country after the USA, with the amount sent out of the country annually estimated at US$37 billion in 2014.
The exact workings of the remittance tax have not been made clear yet, but it has been reported that the Shoura Council is in favour of a tax that starts at six per cent in the first year of living in Saudi Arabia and gradually reduces to two per cent permanently from the fifth year onwards. While this could encourage longer stays in the country, the initial six per cent tax could discourage potential expats.
A tax on remittances is the latest proposal by the government to raise revenue and diversify its economy after plans to introduce a green card-style system were announced earlier in the year. And as part of a ‘National Transformation Plan’ unveiled in June, an income tax for expats was put forward by finance minister Ibrahim al-Assaf.