Saudi Arabia’s Expat Levy Problem

If you have kept up with all of our coverage of Saudi Arabia’s expat news, you will be aware that the Gulf state introduced an expat family tax as part of a series of financial reforms set to wean the Kingdom off of its financial reliance on oil. However, some financial experts are warning Saudi Arabia that its expat measures may cause the opposite effect of what they intended.

Once famed for its lack of levies, Saudi Arabia demolished tax-free living back in early 2017 as a way of creating income. Countries throughout the Gulf have also been introducing VAT to some products to further generate revenue.

Lower income expat families from the likes of India, Pakistan, Sri Lanka, Bangladesh and Nepal have been the hardest hit by the new financial measures. Many expat families are having to send their children back to their homelands to stay with friends and relatives to offset the family levy so that they could continue making an income in Saudi Arabia. However, some expats have left Saudi Arabia completely and businesses owners are displeased with the government as they have lost numbers of their workforce which they are finding hard to replace as expats are put-off working in the Kingdom.

Despite the Kingdom putting in the various taxes and expat rules to better the country as a whole, economists warn that these do not seem to be working as intended. With the government set out to help Saudi Arabia and its people flourish, the expat population has suffered. Considering that the expats make up approximately 65% of Saudi Arabia’s workforce, the adverse consequences of levies and other expat legislation are slowly proving the changes to be causing more harm than good.

Expats are already leaving Saudi Arabia and experts only expect this to continue. This will undoubtedly have a negative effect on the already suffering market – apparent in the many signs advertising vacant premises for rent.