How Saudi Arabia’s expat dependent tax will affect Indian families

Saudi Arabia's expat levy on family members and dependents will come into force on July 1 and it is set to impact millions of Indians living in the Middle Eastern kingdom and their families in both the countries.

By: Express Web Desk | New Delhi | Published:June 21, 2017 9:28 pm
An Asian labourer looks on as he works at the construction site of a building in Riyadh, Saudi Arabia. (REUTERS/Faisal Al Nasser)

Saudi Arabia’s monthly expatriate levy on family members and dependents will come into force on July 1 and it is set to impact millions of Indians living there. A large Indian expat community lives in Saudi Arabia and it is set to be heavily affected by the move that seeks to increase the levy each year till 2020. The move was announced by the Saudi government last year but it is coming into force this year.

At present, companies pay a levy on each expat employee of 200 Saudi Riyal. This is applicable where the expat employees working for an employer are more than Saudi nationals. By 2020, this amount will be gradually increased to SR800. The move is part of the Saudi government’s Fiscal Balance Program–according to its Balanced Budget 2020 document. According to conservative estimates, there are at least three million Indians currently living in Saudi Arabia.

The companies where expat employees are less than the native workers, the levy will be charged, albeit at a discounted rate. The levy on dependents is one that will have to be paid by the employees and it could potentially become a big financial burden on the people working in Saudi Arabia. From the outset, the Saudi government will charge SR100 (Rs 1,700) for each dependent each month.

Though the levy amount may not appear daunting from the beginning, it will be increased on a year-on-year basis till 2020 at a significant rate.

From July 2018, the levy on dependents of expats will be doubled to SR200 per person per month. The same levy will increase to SR300 from July 2019 and SR 400 from July 2020. If a person stays with a small family–say a dependent spouse and two children, the levy each month will be Rs 5,700. The annual levy for each dependent will be Rs 20,400. By 2020, this will have increased to Rs 81,600. For the smallest nuclear family of a dependent spouse and a child, the dependent levy by 2020 will be annually Rs 1,63,200. According to conservative estimates, there are at least three million Indians currently living in Saudi Arabia. The new levy will augment the government’s revenue. But, it will make life more difficult for the average Indian living in the country.

The Indian expats include not just the blue collar workers, but also the doctors, nurses, engineers, architects, bankers, executives etc. India’s young workforce looks toward the Middle East and the Arabian kingdom has been one of the most attractive employment destinations and the financial burden will put a strain on the individuals. The country doesn’t levy any income tax from employees though, whether Saudis or expats.

Nonetheless, it is a fact that Indians are instrumental in running schools, hospitals, factories, businesses, building infrastructure, doing menial dead-end jobs etc in Saudi Arabia. Others from Sri Lanka, Bangladesh and Phillipines also make up the workforce but Indians by far make the largest chunk.

The picture becomes clear when we delve deep into the daily difficulties of Indians living abroad. The average wage of labourers and small job workers, the largest section of the expat workforce, in Saudi Arabia is 8 Riyals per hours. This is roughly around Rs 1,100 per day of an 8-hour shift. If a person works each day of the month, the salary is around Rs 33,000. Considering the expenses of living in a foreign country and having dependent levies to pay, it wouldn’t seem the easiest place to survive for many Indians. That’s the reason several reports have started trickling in of Indians sending their dependents back to India. Apart from living expenses, the visas have to be renewed each year–that is an added expense, medical expenses are an added burden, there is no hazard pay for labourers.

 

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