Saudi expats hit by levy, fuel hike and VAT triple blow

Saudi nationals and expatriates alike have started the new year with a jolt with a number of structural economic reforms including a major hike in fuel prices, the introduction of Value Added Tax (VAT) and the impact of the financial levy on expatriate workers all impacting on individuals at the same time.

Twelve Saudi government and semi-government departments have been tasked with carrying out these reforms from the turn of the year.

These authorities consist of the ministries of labor and social development, commerce and investment, transport, the General Authority of Zakat and Tax (GAZT), Passport Department (Jawazt), Capital Market Authority (CMA), Public Transport Authority, Saudi Electricity Company, the Electricity and Cogeneration Regulatory Authority (ECRA), National Water Company and the General Organization of Social Insurance (GOSI).

Fuel prices increased as of midnight Sunday December 31 and according to local news outlet The Saudi Gazette, Octane 91 fuel which cost 0.75 Saudi Riyals (75 halalas), which equates to 15 pence sterling (£0.15) per litre has risen to SR1.37 (£0.27) per litre and 95 octane which cost 90 halalas per litre is now being sold at SR2.04 per litre.

The electricity tariff for Saudi nationals and expats alikehas also increased threefold in most cases, according to local reports.

Diesel for industries and utilities will cost SR0.378 and the price of diesel for transport remains unchanged at SR0.47. Kerosene price also remains unaffected at SR0.64.

5% VAT introduction

As reported, for the first time, people in the Kingdom will start paying 5% VAT on their purchases of goods and services.

Also companies and private establishments have been forced to start paying SR400 every month each for expatriate workers who are themselves paying fees of SR200 for each of their dependents.

A large number of expatriates, especially those with a large number of dependents, have already opted to send their families back home, with, as reported, an exodus of hundreds of thousands of expats out of Saudi Arabia in the last six months.

The Saudi Gazette report added that to assist Saudis facing the rising cost of living under these reforms, the government has initiated the Citizen’s Account under which more than 11 million citizens will receive monthly financial assistance.

The Saudi Ministry of Labor and Social Development has revoked its earlier decision making housing allowance equivalent to two months basic salaries and said that this should be now be negotiated between the employer and the employee.

As reported, July’s introduction of a new levy on expatriate workers and their families living in the kingdom has hit expats hard.

This is in line with the Saudi crown prince Mohammed Bin Salman’s (pictured left) plans to restructure the Saudi Arabian economy to make it less reliant on oil and  as part of the kingdom’s National Transformation 2020 plan.

The increasingly powerful crown prince, pictured left, whom, as reported, was reported to have imprisoned relatives and other princes that have disagreed with his policies towards the end of 2017.

ABOUT THE AUTHOR
Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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