The Kingdom of Saudi Arabia has suspended fees charged on expatriate workers from the industrial sector for the next five years. The Saudi authorities have announced that the government will pay the mandatory 5-year costs on behalf of licensed industrial institutions.
The decision was announced by the Saudi Cabinet on Tuesday, and the order will officially come into effect from 1st October.
Fees Suspension for Expatriate Workers
The decision to waive off the mandatory fees on expatriate industrial workers was announced on Tuesday. These fees came into action back in 2018, and all companies hiring foreign workers were required to pay 300 riyals for every work permit.
— ArabianBusiness.com (@ArabianBusiness) January 9, 2017
Reports suggested that these mandatory expatriate worker fees were set to be increased to 600 riyals in 2019, and 800 riyals in 2020 for every expat worker. In 2018, the tax was set at 300 riyals for all companies who hired more locals and less foreign workers, and it was expected to undergo a gradual increase until it reached 700 riyals in 2020.
Many businesses operating in the industrial and manufacturing sectors of the Kingdom are accustomed to hiring foreign labor at cheaper rates. Since the fees were imposed in 2017, many companies have struggled to pay these costs, which were imposed alongside value-added tax and subsidy reductions.
The scheme also dismissed the fee increments for some companies that were unable to pay such high costs.
Experts maintained that the taxes led to a mass departure of foreign laborers from Saudi Arabia, which adversely impacted the economy, and did absolutely nothing to reduce unemployment across the Kingdom.
This waiver has come as a part of the Kingdom of Saudi Arabia’s Vision 2030 economic reform plan. Analysts observe that the latest decision by the Saudi cabinet is aimed at providing the Kingdom with a competitive advantage over other Industrial and manufacturing sectors across the Middle East.
Omar Maursy, Vice President of the S&P Global Market Intelligence, said, as cited by Al Arabiya English, “Saudi Arabia needs to have a high-level of engagement, something that can encourage people to come and do business.”
Read more: Saudi boosts citizen benefits as taxes bite
Earlier in February, the Saudi King Salman bin Abdul Aziz approved a $3.1 billion scheme to provide financial assistance to the companies who had been burdened by the increase in taxation on permits for expat workers in the aftermath of the fees imposed back in 2017.
This plan was aimed at reducing the tax-related burden and aid in reviving economic growth across the Kingdom. The scheme also dismissed the fee increments for some companies that were unable to pay such high costs. However, businesses complained that the measures failed to be sufficiently effective.
All the details about Saudi's new expat dependent fee…https://t.co/cKZFT1G54k
— Gulf Business (@GulfBusiness) July 6, 2017
Earlier in September, the Kingdom of Saudi Arabia announced its decision to dissect the Ministry of Energy, Industry and Mineral Resources into two different ministries, as part of the agenda to liberalize the Saudi economy, reduce the heavy reliance on oil-based revenues, and diversify the manufacturing industry.