Saudi Arabia’s cabinet announced on Tuesday that the government will pay five-year mandatory fees for expatriates working in the industrial sector starting on October 1.
The fees were applied in 2018 on companies hiring foreign workers and are set at 300 riyals for every work permit. They were set to increase to 600 riyals in 2019, and 800 riyals in 2020 per expat employee.
The tax amounted to 300 riyals in 2018 for companies that have less foreign employees than locals, and is set to gradually increase until it reaches 700 riyals in 2020.
As the government continues applying its Vision 2030 economic reform plan, the latest cabinet decision is expected to give the Kingdom a competitive advantage among its peers in the industrial and manufacturing sectors in the Middle East, according to economists who spoke to Al Arabiya English.
“Saudi Arabia needs to have a high-level of engagement, something that can encourage people to come and do business,” said Omar Maursy, Vice President of S&P Global Market Intelligence.
Saudi Arabia’s King Salman bin Abdulaziz approved in February a scheme to reimburse some of the companies who faced trouble paying the increasing taxes for expat work permits since the fees were imposed in 2017.
The plan also waived fee hikes for some companies that were not able to pay, according to the country’s labor minister.
Earlier this month, the Kingdom divided the Ministry of Energy, Industry, and Mineral Resources into two separate entities as it works towards liberalizing its economy, diversifying its manufacturing sector, and easing dependence on oil revenues.