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Saudi Arabia introduces expat levy, consumption tax plans

Saudi Arabia introduces expat levy, consumption tax plans

RIYADH: Saudi Arabia announced plans to balance its budget by 2020. As part of an agenda at Gulf Cooperation Council (GCC) level, Saudi Arabia will introduce an excise tax on harmful products from the second quarter of 2017. Soft drinks will be taxed at 50 percent and energy drinks and tobacco at 100 percent. It will then introduce the pan-GCC value-added tax from the first quarter of 2018 at a five percent rate.

Having already increased visa costs for visitors and raised municipal taxes recently, the country is to overhaul its levies on companies hiring expatriates, beginning from the third quarter of 2017. Concessions for companies hiring more Saudis than expats will be reduced, with levies as high as SAR 800 a month in 2020 for companies that continue to hire more expats than Saudis.

Currently, neither Saudi nationals nor foreign laborers pay income taxes. The Government has confirmed this policy will remain in place.

“Other G20 countries have a much broader base of revenue – with taxes, fees, and duties covering between 70-100 percent of expenditure,” says the Budget document. “Hence, there is an urgent need to broaden the Government’s revenue base – which started in 2016, and is being extended in future years.”

The measures are expected to raise an extra SAR 42billion (USD11.1bn) in tax revenues in 2017, and SAR 152 billion by 2020.