One third of Saudi firms have paid expat tax - report

Regulations designed to boost number of Saudi nationals in private sector

(Photo for illustrative purposes only)

(Photo for illustrative purposes only)

Around 30 percent of private sector companies operating in Saudi Arabia have paid the new expatriate fee for overseas employees, Arab News reported, citing an unnamed source. 

Several companies have falsified documents in a bid to avoid having their status downgraded to a red category, which will require them to sign an agreement stipulating that they will change, the newspaper said.

Private sector companies in Saudi Arabia will have to pay SAR2,400 for each overseas employee not permitted under their Saudisation quota. The move, which is expected to generate up to US$2.6bn in fees for this Islamic calendar year, took effect on November 15. It stipulates that employers cannot have more expatriate staff than they do Saudi workers.

Saudi Arabia, which is struggling to create public sector jobs thanks to a decades-long population boom, is pushing ahead with plans to encourage more private sector companies to reduce their foreign workforce in favour of Saudis.

Roughly nine in ten employees of private firms in Saudi Arabia are expatriates, according to official estimates. Foreign workers, mainly from south or southeast Asia, generally command lower wages than Saudi staff.

The Gulf state needs to create 3m jobs for Saudi nationals by 2015 and 6m jobs by 2030, Labour Minister Adel Al Fakeih said in January.

Under the new fee system, domestic workers, foreigners with Saudi mothers and citizens of other GCC countries are exempt.

“The aim of this decision is to increase the competitive advantage of local workers by reducing the gap between the cost of expatriate labour and local labour,” the Ministry of Labour said in a statement last month.

The measure has been criticised by companies operating in the kingdom and the Gulf state’s Shoura Council, which drafts and proposes legislation to the Saudi king. The council said it is not part of the Ministry of Labour’s remit to decide laws on hiring practices.

“I do not need to mention that this will not help in solving the problems with Saudisation, but aggravate them,” said Ahmed Al Dhaylai.

Contracting companies were last week reported to have refused to comply with the new rules.

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