Saudi Government considers income tax for foreign residents

In a plan to diversify their economy, Saudia Arabia are considering levying a new income tax on foreign residents. As economic growth in the country has slowed, a proposal in which 1/3rd of the population who are foreign workers are taxed on their income has been put forward in a National Transformation Plan. Foreign workers have notoriously been attracted to the Gulf region’s income tax free status and loss of this status may mean that making a move to the area could prove less attractive to expatriates.  Here at International Tax Search, we are regularly speaking with professionals who are attracted to the Middle East due to its tax free status. Professionals view the area as a place where they have the ability to save money whilst enjoying sunny climates for a couple of years before returning home. We will be keen observers in seeing how the Gulf region competes with Europe, the US and other large financial districts for the best talent if they decide to implement this proposal for income taxes.

The article states:

Saudi Arabia is considering imposing income tax on foreign residents, Ibrahim al-Assaf, the finance minister said, as the cash-strapped kingdom seeks to raise non-oil revenues and cut spending to fund its $72bn plan to diversify the economy.

Riyadh, scrabbling to raise the funds needed for wide-ranging reforms from fiscal and investment policy to education and housing initiatives, is taking the unprecedented step of tapping global bond markets and reprioritising domestic spending.

Income tax on the one-third of residents who are non-Saudis would raise a significant amount of non-oil revenue for the government, but could also make hiring expatriates more difficult. The Gulf’s income tax-free status is a key element in attracting foreigners to the region.

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Saudi Arabia considers income tax for foreign residents