Working or doing business in Saudi Arabia promises exciting opportunities, but not having knowledge of tax in Saudi Arabia for expats often ends up with confusion and a little stress.
The fear of penalties from missing something in VAT or unreported income can affect the benefits of a tax-free salary. Questions like "Do I pay income tax?" frequently asked by man professionals working in Saudi Arabia.
So here is a clear solutions for you to understand the tax in Saudi Arabia for expats.
What Is Actual Tax Residency in Saudi Arabia?
Determining your tax residency is crucial when dealing with expats taxes. Saudi Arabia considers you a resident if you have a permanent home and stay at least 30 days in a tax year. Alternatively, spending 183 days or more qualifies you, even without a fixed address.
For expats with Iqama permits, residency is automatic and it affects the status of how tax in Saudi Arabia applies, especially for business activities. Non-residents face withholding taxes on certain incomes.
Knowing your residency helps avoid surprises and it also guides filings and exemptions in taxes and always track your days in the country.
What Are the Income Tax Rules for Expats?
Salaries, allowances, and employment income are fully tax-free for residents and non-residents alike and this policy makes the Kingdom appealing for professionals.
But, self-employed expats or those with business interests may face corporate tax at 20% on net profits. This applies if you're non-Saudi and non-GCC.
How Does Value-Added Tax (VAT) Affect Expats?
Introduced in 2018, it's charged at 15% on most goods and services including retail buys, professional fees, and imports. If we talk about daily situations, expats encounter VAT daily, from groceries to entertainment.
But there are different rules for businesses:
- Businesses must register if taxable supplies exceed SAR 375,000 annually.
- Non-residents must pay tax for goods or services in the KSA and must register within 30 days.
- The registration will start from the date of that first taxable supply.
Ensures smooth financial management amid taxes in Saudi Arabia.
What Is Zakat and How Does It Affect Expats?
Zakat, a 2.5% wealth tax, primarily applies to Saudi and GCC nationals in tax in Saudi Arabia for expats. It's based on assets like cash, inventory, and net worth held over a lunar year.
Expats are generally exempt from Zakat. However, if partnered with Saudis in business, it may impact the entity.
This religious obligation separates from income tax.
What Are Social Security Contributions (GOSI) for Expats?
Social insurance is mandatory in Saudi Arabia for expats. The General Organization for Social Insurance (GOSI) requires contributions for protection.
For non-Saudi employees, employers pay 2% for occupational hazards and self-employed expats contribute 18% of gross income.
Understanding it prevents gaps in coverage. You can also calculate your vat online from a VAT Calculator for Saudi Arabia.
What Are the Corporate and Withholding Taxes in Saudi Arabia?
Corporate tax at 20% targets non-Saudi business profits in tax in Saudi Arabia for expats. This includes permanent establishments or shareholdings.
- Withholding tax applies to non-residents on royalties, rents, and services.
- Rates vary from 5% to 15%.
- Special Economic Zones offer reduced rates, like 5%, to lure investment.
These taxes encourage formal business setups. They shape investment decisions in tax in Saudi Arabia for expats.
Some Other Taxes and Exemptions
Beyond core taxes, tax in Saudi Arabia for expats includes excise taxes on harmful goods like tobacco at 100%. No estate, gift, or wealth taxes exist.
Real Estate Transaction Tax is 5% on property sales, paid by sellers. Customs duties range 5-25% on imports in tax in Saudi Arabia for expats.
Tips for Managing Taxes as an Expat
- Keep good records: Track your days in the country, income, and expenses carefully.
- Get expert advice: Talk to tax advisors who know both Saudi and your home country’s tax laws to avoid mistakes.
- Register for VAT (if needed): If VAT applies to you, register and claim any refunds quickly to save money.
- Stay informed: Keep up with tax changes like VAT increases or new tax zones. Use resources from ZATCA (the Saudi tax authority).
- Plan for indirect taxes: Include them in your budget and use any exemptions available to reduce costs.
Conclusion
With no personal income tax and clear rules on VAT, Zakat, and contributions, expats can thrive financially.
Proactive planning ensures compliance and peace of mind in tax in Saudi Arabia for expats. Seek expert help when needed.
