Saudi Arabia may impose income tax on foreign residents
Author: PM editorial | Date: 29 Jun 2016
Proposal is part of the kingdom’s plans to reduce dependence on oil revenue
Saudi Arabia is considering an income tax for foreign residents as it looks for ways to diversify its economy and reduce dependence on oil revenue.
In 2011, when oil prices were much higher, the kingdom’s GDP was over ten per cent – but the slump in oil price has caused the GDP to fall to around two per cent this year.
The proposed income tax for expats was included in the country’s National Transformation Plan, announced by finance minister Ibrahim al-Assaf. However, he was keen to stress that the tax was just “an initiative that will be discussed,” and by no means a certainty.
“Deepening the taxation base will be an important step in increasing non-oil revenue, which will likely start with VAT first, but the discussion of income tax is notable," Monica Malik, chief economist at Abu Dhabi Commercial Bank told The National.
Such a tax could potentially raise a large sum of money from the non-Saudi population – which makes up around a third of total residents - but would also make the prospect of moving there to live and work less attractive for expats than the other tax-free Gulf nations.
Other goals of the National Transformation Plan include creating more than 450,000 jobs outside the government sector by 2020 and producing more than $72 billion of goods and services locally instead of abroad – which should reduce imports and create more job opportunities.
Earlier this year Saudi Arabia announced its Vision 2030 (its economic plan for the future), which includes a $2 billion investment fund and raising non-oil revenues to $267bn a year. The government reported a budget deficit of $87bn for this year, which has forced it to speed up economic diversification plans.
The Saudi Shura Council has also been studying a proposal to levy six per cent fees on bank transfers out of the country, to encourage expats to spend or invest their money locally.