Saudi council calls for SMEs to be exempt from new expat levy

From January 1 companies are being charged up to $107 a month for each foreign worker

The Council of Saudi Chambers (CSC) has reportedly proposed a number of changes to the kingdom’s recently introduced expat levy due to concerns private sector firms are struggling with the new charges.

From January 1, companies must pay a SAR300 or SAR400 ($80-107) monthly fee for each foreign worker, with those that employ an equal or greater number of Saudis than expats paying the lesser amount.

Over the last week a number of requests have been made to scrap the fee or exempt some categories of firms, amid claims from some businessmen that up to 40 per cent of small and medium enterprises are on the brink of closure.

Read: Saudi chamber asks for new foreign worker levy to be scrapped

Arabic newspaper Al-Madina reported on Tuesday that Council of Saudi Chambers officials met with labour minister Ali Al-Ghafis to submit their proposals.

These included extending the timeline of payment increases from 2020 to 2025, according to the publication.

The current system would see the fee per worker increase to SAR500-600 ($133-160) a month in 2019 and then SAR700-800 ($187-$213) a month in 2020.

The council also wants micro, small and medium businesses to be exempt from the levy in their opening years.

Currently only firms with five or fewer employees are exempt.

Read: Saudi companies with five or fewer employees exempt from new expat fees

SMEs in Saudi Arabia are considered firms with one to 249 employees and an annual turnover of SAR3m ($800,000) to SAR200m ($53.3m).

Jeddah Chamber of Commerce and Industry’s entrepreneurship committee head Thamer Al-Farshouti has estimated up to 30 per cent of private sector companies could shut down if no changes are made to the current policy, according to reports.

Read: Saudi chamber asks for new foreign worker levy to be scrapped

He suggested that the government charge firms on the monthly basis that the fee is described rather than the current system where the full amount is collected at visa issuance or renewal.

This hefty upfront cost must be paid regardless of whether the employee stays at the company for the duration of the visa.

The government is expecting to raise $6.3bn from the new foreign worker fee in 2018 $11.73bn in 2019 and $17.33bn in 2020, Okaz reported in December.

Read: Saudi government to raise $6.3bn from 2018 expat levy