14 June 2017

Saudi Arabia’s plan to impose more levies and taxes on expat workers and their families is forecast to generate 65 billion Saudi riyals ($17.33 billion) for the kingdom by 2020, but it could also have a negative impact on the private sector, analysts and industry experts have warned.

Here is a guide to some of the main points of the new plan:

- Starting next month, the kingdom is set to start collecting a new monthly fee of 100 Saudi riyals for every expat dependent, with plans to increase the fee gradually next year until 2020.

- It is not clear who will shoulder the new levy, although some reports have indicated that foreign workers could end up having to pay for it, not their employers. “I suppose in most cases it will be borne by expats,” M.R. Raghu, executive vice president for Kuwait Financial Centre “Markaz”, told Gulf News.

- Companies that have more foreigners than locals on their payroll are currently spending 200 riyals every month for every expatriate. The fee is applicable only to foreign workers that exceed the number of Saudi staff. Between next year and 2020, the tax will gradually increase.

“For expatriate employees not exceeding the number [of] Saudi employees, the fee will no longer be waived but will be levied at a discounted rate,” consultancy firm PwC said in its briefing paper.

The new levy comes at a time when the Saudi government is looking to diversify its revenues away from a dependence on hydrocarbons, especially at a time when oil prices are still low.

Abdullah Al Maghlouth, a member of the Riyadh Chamber of Commerce and Industry, warned that the new tax will negatively impact the private sector.

“The fees will have an adverse effect on the private sector including the contractors, the building material, the food and consumer products will increase prices. The citizen will be harmed. This will also harm the attractiveness of the work environment in the kingdom,” Saudi Gazette quoted Al Maghlouth as saying.

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