Saudi Arabia mulls self-sponsorship scheme

Under the plan expats can pay 20% annual tax and eliminate the need for a local sponsor

For the first time Saudi Arabia is considering giving expatriates the opportunity to become self-sponsors.

Under a new proposal the foreigners could register as self-employed by paying an estimated tax rate of 20 per cent annually, meaning foreigners would no longer need a Saudi them.

Currently, Saudi nationals register businesses under their names and the expatriates run the business and pay a percentage to the nationals.

As a result, funds that would have gone to the state are being diverted to individuals.

The commercial cover-up phenomenon has cost the national economy billions of riyals, Saudi daily Al Eqtisadiya reported yesterday.

Economist Ahmad Al Jubeir said that foreigners dominate commercial activities and commercial cover-ups account for 80 per cent of the Saudi economy national to sponsor which is equivalent to 300 billion riyals. The situation has also been a chief factor behind the Saudi unemployment problem.

“Commercial cover-ups represented more than 20 per cent of the gross domestic product in 2014,” he said, quoted by Al Riyadh newspaper.

“Around 30 per cent of the expatriate labour force are working for themselves under commercial cover-ups.”

Authorities have been trying to tackle ways to reform the labour market amid an oil price slump that has forced the country to implement austerity measures.

Last month, Majed Bin Abdullah Al Kassabi, the Minister of Commerce and Investment, suggested foreigners should be allowed to invest within specific regulations and pay taxes.

Tax study

Official agencies are now studying the imposition of the tax which can be based either on the statutory audit of income, expenses and profits provided by the foreigner or on discretionary benefits in the absence of profits, such as 15 per cent in the construction sector or 25 per cent for the consultancy professions, the daily added.