Saudi to impose family tax: What it means to 41 lakh Indians & their kins

Saudi Arabia has always been a popular destination for job seekers. However, starting next month, things are about to change for the worse for expats. From July, Saudi will be collecting a new tax from expats and their dependents. The 'dependent fee' will be 100 Saudi riyals (approx. Rs 1,723, as on Wednesday) per month for each dependent. The amount is expected to increase gradually every year until 2020.

 

According to TOI, several Indians employed in Saudi Arabia are planning to send their dependents back to India as it is likely to prove a big financial burden for them.

 

Indians form Saudi Arabia's largest expat group and hence, will be most affected. Reportedly, 41 lakh Indians are currently working in the Kingdom.

 

Will this help Saudi as it struggles with financial crisis

 

Expat levy is seen to boost kingdom's revenues amid low oil prices. However, according to Gulf News, "reforms such as the levy on foreign workers may help augment government revenues, but they can increase the cost of doing business in the kingdom."

 

Companies in Saudi Arabia currently spend 200 Saudi riyals per month to cover the levy for every non-Saudi employee. This applies to organisations where foreigners exceed the number of local workers.

 

Migrant rights activist Bheem Reddy Mandha said several people had already sent their families back in the past four months. "The men have become forced bachelors," he told TOI.

 

Saudi - a no income tax 

 

According to iExpats.com, the International Monetary Fund (IMF) is urging the Gulf states to introduce more taxes to soften the impact of falling government revenues as the price of oil drops, leaving a black hole in budgets.

 

"Saudi Arabia has one of the most liberal labour policies globally, with very few restrictions on importing foreign labour to work in the kingdom,” says the government.

 

"Currently, neither Saudi nationals nor foreign labourers pay income taxes, and this policy will remain in place.”

 

Why is the Kingdom of Saudi so popular for Indian job seekers?

 

The kingdom is home to largest Indian passport holders outside India with around 41 lakh Indians working there and over 400 Indian companies. It is attractive because so far Saudi has not imposed any tax on income earned. 

Saudi law provides full protection to all expatriates, which includes a unified labour contract and provisions that prohibit employing persons in jobs different from the profession stated in the contract, said Saudi Ambassador Saud Al Sati.

 

In an interview to TOI, he said, rules prevent workers from being made to work longer than five hours at a stretch. Whenever Saudi authorities are provided with valid information, detailed investigations ensue, and violators face action."