From July Saudi Arabia will be collecting a new tax from expatriates and their dependents at the rate of SAR100 (£21) per dependent per month. The fee will be paid annually when a residence visa is sent for renewal or when a new visa is being issued.

The amount is expected to double next year and to go on increasing, to reach SAR400 in 2020.

Currently private sector companies in Saudi Arabia pay SAR200 per month as a levy for every non-Saudi employee in organisations where foreigners exceed the number of local workers. Previously this tax was not applied if companies hired more Saudi nationals than foreigners, but under the new tax laws the fee will now be discounted rather than waived.

Potential plans to levy income tax and or remittance tax on expatriate employees has been placed on hold for now. However, Saudi Arabia has begun implementing an excise tax on certain products that are viewed to be harmful to individual’s health.

This includes tax of 50% on soft drinks and 100% on tobacco products and energy drinks. The move is expected to produce additional revenues of SAR 8bn to SAR 10bn within six months.

In addition, the Saudi National Budget 2017 revealed that the country has signed up to a unified framework agreement for VAT amongst states in the region in December 2016. This will see Saudi Arabia implementing VAT from a projected date of January 2018, most likely at 5% and with some exceptions for basic food items, healthcare and education. 

All six Gulf Cooperation Council (GCC) states—Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Oman and Qatar— have said they will introduce VAT during 2018 and by 1 January 2019, but with no confirmed dates so far. Commentators have suggested this will push up expenses costs for foreign companies with workers in the region and have expressed concerns about the lack of details so far on how businesses will operate VAT recovery claims.