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Saudi Arabia: Expansion of foreign worker levies announced as part of Saudization

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February 16, 2017

As part of the ongoing Saudization process of the Saudi workforce, the government has announced an expansion of the expatriate (foreign worker) levy.

EMPLOYER ACTION CODE: ACT

As part of the ongoing Saudization process of the Saudi workforce, the government has announced an expansion of the expatriate (foreign worker) levy. The changes announced in the Fiscal Balance Program — Balanced Budget 2020 (part of the larger Saudi Vision 2030 program) will be phased in between 2017 and 2020, and involve both the expansion of the existing levy on employers and the introduction of a new levy on the dependents of foreign workers.

KEY DETAILS

At present, in companies where foreign workers comprise more than 50% of the workforce, the employer is charged a levy of SAR 200 per month for each foreign worker that exceeds the number of Saudi or Gulf Cooperation Council nationals. No levy is payable where the number of foreign workers is below 50% of the workforce. Beginning in 2018, the levy will be assessed (per employee) on all foreign workers based on the following schedule, depending on workforce composition:

Effective date Foreign workers > 50% of total workforce Foreign workers ≤ 50% of total workforce
January 1, 2018 SAR 400 per month SAR 300 per month
January 1, 2019 SAR 600 per month SAR 500 per month
January 1, 2020 SAR 800 per month SAR 700 per month

Foreign workers with dependent families in Saudi Arabia (as listed on their residence permits [Iqamas]) will be required to pay a levy for each dependent when renewing their Iqamas. The introduction of this levy will be phased in between 2017 and 2020 as follows:

  • July 1, 2017 — SAR 100 per month per dependent
  • July 1, 2018 — SAR 200 per month, per dependent
  • July 1, 2019 — SAR 300 per month, per dependent
  • July 1, 2020 — SAR 400 per month, per dependent

It is estimated that levies will bring in around SAR 65 billion in annual revenue for the government by 2020 under its Balanced Budget 2020 program. Over the longer term, the levies are also intended to encourage businesses to rely more on Saudi nationals and hire foreign workers only where they add real value to operations.

EMPLOYER IMPLICATIONS

Employers with operations in Saudi Arabia should evaluate the financial implications of the levy increase and may want to consider reviewing the number of foreign workers employed, particularly in trades and industries where there are adequately qualified, skilled Saudi nationals able to perform the same work.

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