Saudi Arabia to introduce new family tax from July 1; here's how it will affect 41 lakh Indians

Highlights: 

1. Saudi Arabia will introduce 'dependent fee' of 100 riyals per month for each dependent of foreign nationals 

2. The new tax is set to prove a big financial burden for the Indian expats as about 41 lakh Indians work in Saudi Arabia 

3. The tax amount is expected to increase by 100 riyals per dependent every year till 2020 
 

Saudi Arabia has announced to impose tax on dependents of foreign nationals starting from July 1 this year which is likely to impact 41 lakh Indians working into the country, The Times of India reported.  

The country is set to introduce 'dependent fee' of 100 riyals (nearly Rs 1,700, as on Tuesday) per month for each dependent and is likely to prove a big financial burden for the Indian expats, the report said. 

"Some families I know have made plans to return to Hyderabad as they feel they cannot afford to stay there any longer," the report said quoting Mohd Taher, a computer professional who lives in Dammam, as saying.

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 said to the newspaper.

Saudi Arabia has been a popular destination among Indian job seekers.

The country is home to largest Indian passport holders outside India with around 41 lakh Indians working there and over 400 Indian companies, according to Business Standard report.  

The country's 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, the Business Standard news report said quoting Saudi Ambassador Saud Al Sati, as saying. 

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Why Saudi Arabia is popular job destination? 

The country has liberal labour policies for foreign nationals as well as for its own nationals plus the salary has no income tax. 

According to iexpats.com, 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.”

How does new family tax will affect Indians working in Saudi Arabia? 

According to The Times of India report, Saudi Arabia issues the family visa to people with a salary of 5,000 riyals (approximately Rs 86,000) per month. 

So, an Indian expat living in the country with his wife and two children would have to pay 300 riyals (approximately Rs 5,100) a month. 

The tax amount is expected to increase by 100 riyals per dependent every year till 2020, cited the news report. 

Moreover, the expats have to pay this dependent fee in advance. 

To put things into perspective, if a man's dependant wife is to stay in Saudi Arabia for one year, a total of 1,200 riyals has to be paid in advance at the time of the renewal of the 'iqama' (residence permit), the report said. 

So, for a family of three dependants (wife and two children), the employee will have to pay an advance tax of 3,600 riyals or around Rs 62,000 per year, it added.

While some companies are planning to compensate their employees for the 'dependant fee', most people have no option but pay it themselves. 

When the newspaper asked the Ministry of External Affairs (MEA) on the impact of the 'dependent fee' on Indian expats in Saudi Arabia, the senior official from the ministry said that it will affect all expats. 

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