Global employment briefing: Saudi Arabia, January 2013
- Employment and labour law
New employer tax levied where Saudi nationals comprise less than half the workforce
The Ministry of Labour has recently introduced a new tax for private sector employers (Decision No. 353). This entails the following:
· Any private establishment in which the number of Saudi nationals comprise less than half (or 50%) of the total workforce are required to pay an additional levy or tax for each foreign national employee who is employed in excess of the number of Saudi nationals.
· The Ministry of Labour have a specific formula by which they will calculate the amount that must be paid by any non-compliant employer. This formula is as follows:
The number of foreign employees minus the average number of Saudi employees employed by the employer during the previous 13 weeks (according to the records of the General Organization for Social Insurance) minus the number of foreign employees for whom the employer has already paid their yearly fee, multiplied by SAR 2,400 (two thousand four hundred Saudi Arabian Riyals).
The new tax applies even to those establishments which employ fewer than nine individuals in total.
The tax that must be paid is SAR 200 (two hundred Saudi Arabian Riyals) per foreign national employee, per month. This will translate to a yearly fee of SAR 2,400 (two thousand four hundred Saudi Arabian Riyals) per foreign national employee.
No fee will need to be paid in respect of non-Saudi nationals employed as domestic help or where the non-Saudi national is the son of a Saudi woman who is married to a Saudi national or in respect of citizens who are nationals of the GCC (Gulf Cooperation Council) countries.
The new tax was introduced from 15 November 2012. However, it has subsequently been the subject of much criticism from the private sector community. There have been calls for the Decision to be rescinded, but our sources tell us that this seems unlikely.
For further information, please contact:
Muhammad arif Saeed
Tel: +966 (1) 484 4448
Tel: +966 (1) 484 4448
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.