Saudi Arabia mulls tax on expat remittances

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Dec 22 2016

Update 12/24/2016: Saudi's Minister of Finance has said that expats will not pay taxes, however companies employing foreign workers will pay increased fees starting in 2018. The new fees will be imposed gradually and determined by the company's proportion of foreign employees.  It's important to note that these fees can amount to an indirect tax on expats, as companies may pass costs down to workers -  for example through reduced salaries or living standards.

Additionally, fees will be levied on dependents of expats starting in July 2017.

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In the wake of low oil prices and large budget defects, Saudi joins other Gulf countries in considering taxes on expat remittances. The most recent proposal suggests a 6% tax on remittances for the first year of an expat’s residency, and 2% for the five years following. An earlier proposal to tax remittances was rejected in June.

Expat remittances are a prevalent political discussion across the Gulf countries; politicians shoulder a large part of the blame for current economic woes on remittances, in an attempt to draw attention away from states' mismanaged fiscal policies.  Few spare attention to expatriate’s tremendous contributions to local economies, which very literally could not grow or function without them.

A recent IMF policy report cautioned taxing expat remittances, pointing out that the revenue ‘recaptured’ would not put a dent in the region's deficits. The organisation also stressed that imposing further money transfer costs on a largely low-income population would be 'highly 'regressive.'

Advancing the rights of migrant workers throughout the Middle East