No VAT on expat remittances in Saudi Arabia, say bankers | World Defense

No VAT on expat remittances in Saudi Arabia, say bankers

Khafee

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No VAT on expat remittances in Saudi Arabia, say bankers
GHAZANFAR ALI KHAN
18 December 2017

RIYADH: Senior bankers clarified on Sunday that money sent home by expatriate workers will not be taxed under the value-added tax (VAT) reform initiative to be launched by the Saudi government on Jan. 1 next year.

It was also announced that companies and businesses have only three days left to register and obtain their dedicated VAT account numbers.
Saudi Arabia’s General Authority for Zakat and Income Tax (GAZT) has urged businesses with annual revenues of more than SR1 million ($266,640) to register for VAT before the deadline of Dec. 20, 2017.

“The deadlines for companies with annual revenues between SR1 million and SR375,000, however, has been extended by a year until Dec. 20, 2018,” according to a GAZT statement.

“All businesses including commercial organizations and banks have been advised to make sure they understand the VAT rules and be ready for their implementation after 15 days from now,” said Syed Ahmed Ziauddin, a senior banker who heads the financial institutions and public sector group at Bank Al-Jazirah in Riyadh.
He said: “Aljazirah Bank is fully ready to start from Jan. 1 ... and we are going to apply VAT on our service charges.”

He said that all commercial banks have geared themselves to comply with the VAT regulations. “The banks have also educated their customers about VAT besides advising them about various services that will come under the purview of VAT,” said Ziauddin, while adding that the remittances will not be taxed under the VAT system.
“Money remittance outflows will be exempted,” said Abdullah Ali Nasser Alfuraiji, chief of the Tahweel Al-Rajhi in Riyadh. Alfuraiji made it clear that “the 5 percent VAT tax would be levied on the remittance service fees, rather than the remittances themselves.

He emphasized that “Tahweel will be charging 5 percent of SR18, which we charge as remittance fee for sending funds to India. Hence, the rise will be nominal with customers required to pay 9 halalas extra for remitting money to India.”

The Tahweel chief added that this will be negligible, but will differ from country to country.

Referring to the implementation of the VAT and the levies imposed on remittances, Ahmed Mohammed Al Enazi, general manager of Enjaz Banking Services, the remittance arm of Bank Albilad, said: “There will not be any impact on remittances.” He also confirmed that “5 percent VAT will be imposed on service charges... say like 5 percent of SR16 in case of India and 5 percent of SR20 in case of Pakistan.”

“The 5 percent on banks’ service fees will be paid by the person sending money as per guidelines of the General Authority of Zakat and Tax (GAZT),” said Ahmed.

Banks and remittance centers in the Kingdom charge varying fees on remittances sent to different Asian and European countries.

The imposition of 5 percent VAT “on service charges, not on remittance amounts” was also confirmed by Anwar Ahmed Wajid Khajja, manager of products and partners at Fawri, the remittance wing of Bank Aljazirah in Riyadh.

Referring to the benefits of VAT especially those collected by banks and remittance centers, Cenon Nonie C. Sagadal Jr., marketing representative of Rizal Commercial
Banking Corporation (RCBC) of the Philippines, said: “VAT is a welcome move with a slight increase in remittance fees, which will eventually benefit the remitters and the institutions.

“With the government meeting its financial goals as a result of VAT collection, more employment opportunities will be created not only for Saudis but also for expatriates within the framework of the Saudi Vision 2030.”

http://www.arabnews.com/node/1210776/saudi-arabia
 

I.R.A

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@H!thchiker tax business must be on the boom in kingdom?

Ain't there any act / ordinance to implement VAT? Something legal in writing?
 

Hithchiker

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@H!thchiker tax business must be on the boom in kingdom?

Ain't there any act / ordinance to implement VAT? Something legal in writing?
Yes its on boom..Almost every firm known and unknown involved in this even from Pakistan consultants has been hired in different companies.
https://www.vat.gov.sa/en/vat-rate dedicated website where one can find everything
 

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Im not sure how do expats perceive this? Is it a good thing or a bad one? Im for taxation of everything in return for good services. At least you get to question those in charge.
 

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Im not sure how do expats perceive this? Is it a good thing or a bad one? Im for taxation of everything in return for good services. At least you get to question those in charge.
It's a good thing for economy but unfortunately expats don't like it ..Though personally i like it and its a positive step.One needs to grow an economy and with limited taxation to curtail the shortfall ..Further with opening of economy these things are bound to come
 

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Scorpion

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Be careful what you wish for; you might get it. Once the expat employee sends his family back home, he will spend far less in Saudi Arabia and send much more in remittances to his home country. Families living here require food, clothing and education, toys, toiletries, mobiles, TVs, air fares and a lot more. Plenty of locals are going to go out of business. And there won’t be any monthly fee to collect...
This guy here seems to be raising a valid point however, the issue is that Saudi Arabia is trying to replace small business with huge international companies that generate highly paid jobs for locals and skilled expats. Im all for skilled expats but that not the case in the market right now. Many expats are not skilled and the money sent abroad lead to low foreign reserve mainly to the USD Saudi Arabia has but if the number of non skilled expats are decreased = only few $ billions are sent away considering the new business laws for foreigners Saudi Arabia recently adopts. Expats around the world do pay taxes except in Saudi Arabia and most GCC countries if not all. There are certain things that are funded by the government to support the locals and expats are not excluded from having access to those things like gas for examples, electricity and water. At lease there must be some taxation to fund sectors like municipality services, road constructions..etc.
 

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What revenue will expat fees actually generate?
27 Dec, 2017
by H.E. Dr. Ali Al-Ghamdi

Okaz recently published a financial analysis, prepared by Muhammad Al-Sobhi from Jeddah. The report said that the program of fees on expats and their dependents will bring in SR 133 billion in revenue in three years. This is part of the new programs announced by Saudi Arabia to diversify sources of income and increase job opportunities for Saudi workers.

According to the program, a monthly fee of SR100 is being levied on each expat dependent from July 2017 and this is projected to generate SR1 billion for the government by the end of this year. At the beginning of 2018, fees will be applied to expatriate workers based on their number in private sector firms. If the total number of expatriates in a firm is less than that of the Saudi workforce, then the employer has to pay SR300 per month to the government for each expatriate worker. If the number of expatriates is more than that of Saudis, the firm has to pay SR400 per month to the government for each worker. Moreover, the dependents fee will be increased to SR200 per month from July 2018. All these fees are projected to generate a total of SR24 billion to the state exchequer during the year 2018. The expatriate fee will be increased to SR500 and SR600 respectively while the dependents fee will be tripled to SR300 in 2019, and the total collection of revenues from these increased fees will amounted to SR44 billion.

In the year 2020, the government will impose a fee of SR700 from employers for each expatriate worker if the total number of expatriates in the firm is less than that of the Saudi workforce while the fee for each expatriate worker will be SR800 if the total number of expatriates in the firm is more than that of Saudis. The projected revenue from these increased fees will be around SR65 billion.

The Okaz writer included in his report a quote from the prominent economic expert Nasser Al-Qafari. According to Al-Qafari, the positive impact of the fee levied on expatriate workers and their dependents will not be confined to the general budget or the gross domestic product (GDP) but it will have ramifications on a number of sectors that have witnessed an exorbitant hike in prices such as real estate, cars and consumer products. He noted that there has been a general drop in prices in these vital sectors during the year 2017.

It is unfortunate that neither the writer who prepared the analysis nor the economist who gave his opinion mentioned the possible negative effects of expatriate labor fees and dependents fees.

The projections of collecting revenue amounting to SR133 billion over the coming three years are unrealistic, illogical and impossible. This is because a large number of expatriate workers have already left the Kingdom or are going to leave soon. Many of them sent their dependents home after they found that they were unable to pay the fees imposed on them, especially the dependents fee. They feel that the imposition of the fees on their dependents is unreasonable and unfair and that such fees do not exist in other countries.

Some expats have paid the fees for the first year in the hope that these fees, which they cannot afford, will be abolished in the future. Many of these expatriates, who have large numbers of sons and daughters as their dependents, earn low salaries. Even before the imposition of the dependents fee, they were struggling to make ends meet as they have to spend money on the basic necessities of life, such as food, house rent and the tuition fee of their children, in addition to the fees for the renewal of iqamas (residency permits) and the issuance of exit and re-entry visas. In such a scenario, they cannot afford to pay monthly dependents fee that will reach SR400 for each family member from the second half of 2019.

Finally, we should not forget the benefits of expatriate workers who have contributed immensely to the development and the nation-building process of our country. We need them in many sectors, such as construction, maintenance, health care and others where there are still insufficient numbers of Saudis available.


In the present scenario, there would be no option for expatriates, especially low-income employees, other than sending their family home. Therefore, it will be impossible to collect the revenues predicted by the newspaper writer and the economist referred to at the beginning of this article.

I would like to end with a quote from Sheikh Zayed Bin Sultan Al-Nahyan, founder of the United Arab Emirates. When he was told that around 85 percent of the UAE population was made up of expatriates, Sheikh Zayed said: “The food is the food of God; the wealth is the wealth of God; the bounty is the bounty of God; the creation is the creation of God; the earth is the earth of God. Whoever works and trusts in God, He will bestow him in abundance.”

— Dr. Ali Al-Ghamdi is a former Saudi diplomat who specializes in Southeast Asian affairs.

http://saudigazette.com.sa/article/524829/Opinion/OP-ED/What-revenue-will-expat-fees-actually-generate
 

Scorpion

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I till this moment don't know what things fall under VAT and what not. Our respected General Authority for Zakat and Tax has failed to clearly explain to the public the newly implemented VAT system. The only thing that we know is that we are going to be milked.|0|
 

Khafee

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I till this moment don't know what things fall under VAT and what not. Our respected General Authority for Zakat and Tax has failed to clearly explain to the public the newly implemented VAT system. The only thing that we know is that we are going to be milked.|0|
In the UAE it is very clear - Everything, except education.
 

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When implementing taxes, in GCC they have to seriously take into consideration the expatriate population.

5% + 5% + 5% adds up, plus the dependence fees, puts pressure on the middle class and lower middle class, whcih form the majotiy of the tax payers. So Dr.Ali Al Ghamdi rightly said, people will send their families back home.

This will have a direct effect on the economy, one that might not be all that pleasant.
 

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