Saudi denies plans to impose income tax on citizens

Saudi Arabia’s authorities announced there are no plans to charge citizens income tax, and said also no plans for placing tax on expat workers, as part of its sweeping National Transformation Plan to wean the economy off oil. Meanwhile the government said there are discussions and no decision had yet been made regarding income tax.

On Tuesday, speaking at a press conference Saudi finance minister Ibrahim Alassaf described the income tax for expats part of the plan as merely a proposal.

“There will be no tax on citizens. As for residents, it is a proposal and nothing has been approved yet, and it will be examined. It is an old proposal.”

Ibrahim Alassaf told reporters on Tuesday, that Saudi Arabia will not impose a tax on the money which foreign workers in the kingdom send back to their home countries, finance minister.

Some countries in the Gulf have been considering such a step to raise money and curb outflows of funds as low oil prices strain their finances.

But Alassaf said the Saudi government's economic reform plan, announced on Monday, had approved two taxes: a value-added sales tax, which is expected to be introduced in 2018, and a tax on harmful substances such as tobacco or sugary drinks.

Representatives from Saudi Arabia’s Securities Commission and the Saudi Economic Association, among others, have urged the government to encourage expats to spend more of their earnings in the country instead of sending it back to their home countries.

Mohamed Adel Aqeel, a member of the Securities Commission, said that better investment opportunities were needed for expatriates, “especially since many of their forays in real estate and other sectors have not done well,” local daily Arab News reported him as saying.

The proposed tax on remittances – as proposed by the Shura Council, a government advisory body - would start from 6 percent in the first year and would gradually reduce to 2 percent permanent from the fifth year, Arab News reported last week.

The Shura Council’s finance committee also proposed an income tax.

According to a report on Al Arabiya News Channel, if applied, the council’s income tax on expats would take effect by 2020. Expats working in both Saudi’s public and private sectors would be taxed, local newspapers said.

Meanwhile the Saudi labor minister Mufrej Al-Haqbani said their strategy did not aim to reduce expat workers nor link the reduction of unemployment rates to reducing the number of expat workers.

Saudi Arabia has no “strategic target” to reduce the number of foreign workers in the kingdom as a way to cut unemployment among its citizens, the labor minister told a news conference on Tuesday.

Asked whether he expected the number of foreign workers to fall from a current level of about 9 million, Mufrej al-Haqbani said: “There is no strategic target to reduce the number of working expatriates, and we don't want to link reducing unemployment with expatriates.”

He added, “The presence of expatriates is very important for the economy.”

Big numbers

Last year, expat workers, who make up over a third of Saudi’s population of 31 million, sent home around $42 billion, according to a press report earlier this week.

A World Bank report ranks Saudi Arabia as the second largest remittance-sending country in the world, behind only the United States.

However, income tax will not apply to Saudi citizens, according to Minister of State and Cabinet Member Mohamed bin Abdul Malik al-Sheikh.

“It was clear and explicit that there will be no tendency to impose income tax on citizens,” the minister told journalists in Jeddah on Tuesday, according to the state-run Saudi Press Agency.

However, higher government fees and taxes on “harmful products” such as tobacco and sugary drinks are being heavily considered, officials said.

The planned taxation regime is part of the National Transformation Plan, a part of kingdom’s “Vision 2030” reforms announced in April by Deputy Crown Prince Mohammed Bin Salman.

The National Transformation Plan aims to boost non-oil revenue to $141 billion by 2020, creating some 450,000 non-government jobs.

The NTP will also speed up Saudi Arabia's long-running but slow-paced privatization program. Up to 5 percent of national oil giant Saudi Aramco will be sold to the public, potentially raising tens of billions of dollars.

Now watch: Saudi discusses income, remittance tax for expats