SAUDI ARABIA

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Saudi Country Guide

Saudi Arabia Payroll and Employer of Record: Employment Contracts

To work in Saudi Arabia, you must first get a residency permission (Iqama), which permits you to work for a set period of time (up to two years). Anyone relocating to Saudi Arabia for employment must have a Saudi employer who will act as a sponsor. Furthermore, in order to hire foreign citizens, the enterprise must obtain visa permission from the Saudi Ministry of Labour.

Annual Vacation

  • The mandatory minimum amount of vacation time is 21 days. The statutory minimum is 30 days after the sixth year of work. Most firms give 30 days of vacation beginning with the first year, with top management often earning 40 or more vacation days. It is legal to enable unused time to be carried over to the next year. It is also possible to limit carryover.
  • Employers frequently pay for air tickets for expatriate staff to return home to see family during their yearly break.
  • After two years of continuous work, Muslim employees are normally entitled to Hajj leave. The leave can last up to ten days and can only be used once every five years with the same employer.

Sick

Employees are often granted up to four months of sick leave if a medical certificate is provided. Sick leave is compensated as follows:

  • 100% for the first 30 days
  • From 31 to 90 days: 75% of all
  • Unpaid: 91 to 120 days

Maternity

Female employees are normally entitled to ten weeks of paid maternity leave, with up to four weeks taken before the delivery and at least six weeks taken following the birth. The employee is entitled to half pay during this leave if she has been working for at least one year, and full pay if she has been employed for at least three years from the start date of the leave. If a female employee takes her yearly vacation during the same year as her maternity leave, she will only be entitled to half pay or no pay during that vacation, depending on whether she got half pay or full pay during her maternity leave. Medical expenditures incurred during pregnancy and delivery must be covered by the employer.

Paternity

Paternity leave is paid for three days for fathers.

Family

Following the loss of a parent or child, employees are entitled to 5 days of paid leave. Female Muslim employees who have lost a spouse are entitled to four months and ten days of compassionate leave. Female non-Muslim employees are entitled to 15 days of compassionate leave. Male employees who lose their spouse are entitled to five days of compassionate leave. 

National Holidays

There are in total 9 paid  public holidays.

Other Paid Time Off

Discretionary Time Off

  • Subject to the employer’s consent, an employee may take unpaid leave for a period of time agreed upon between the two parties. Unless both parties agree differently, any leave of more than 20 days would be deemed a breach of the employment contract. 

 

Leave for Illness

  • Short-term work-related disability leave entitles an employee to fully paid leave for 60 days, as well as three-quarters of his or her salary for the next ten (10) months of treatment and recuperation. 

 

Leave for Education

  • An employee enrolled in an educational institution is entitled to unrepeated year paid leave to appear for an examination. However, for repeated-year examinations, the employee is entitled to unpaid leave to sit for the examinations. The number of days of leave will be determined by the number of examination days.

 

The employer may demand the employee to produce documentation in support of the leave request, as well as proof of having taken the examination. The employee must apply for leave at least 15 days before the exam date. If it is established that an employee did not take an examination, the individual will not be paid for the time spent. 

 

STATUTORY EMPLOYEE BENEFITS

Unemployment

In order to offer basic income security to working-age Saudi Arabians, the Kingdom of Saudi Arabia launched the Saudi National Unemployment Assistance Scheme (SNUA), or Hazif program, in 2011. The SNUA is a national Human Resources Development Fund-managed Internet-based ‘e-employment’ help initiative. Saudi Arabia’s SNAU is a targeted program offered to jobless people between the ages of 20 and 35 who have an income or social insurance benefit of more than SAR 2,000, or USD 533. Claimants must also be Saudi or have a Saudi mother and have resided in Saudi Arabia for at least 10 months in the preceding 12 months before filing a claim. Claimants must also create an electronic curriculum vitae and complete e-training courses in order to be qualified for access to an employment database that includes 400 public and private organizations. As of April 2012, the program has 1.16 million beneficiaries, with around 84% of them being women. The Hafiz regulations also offer preference to employment candidates who are handicapped. The Kingdom of Saudi Arabia invests heavily on the Hafiz e-employment aid initiative to reinforce its commitment to gender parity and youth empowerment. The unemployment insurance plan is aimed at jobless Saudi youth and Saudi nationals; however, residents and migrants are not covered. Nonetheless, the Hafiz program in South Saudi Arabia offers basic income stability to young individuals of working age and encourages employment for first-time job searchers.

Workers Compensation

N/A

Social Security

Social insurance payments are paid monthly based on the monthly basic salary plus housing (paid or in kind) with a maximum of SAR 45,000, are calculated at 2% for non-Saudi employees (note that this is not social insurance, but rather occupational hazard), and are paid by the employer. For Saudi employees, the rate is 22%, and it is paid by both the employee (10% = 9% social insurance + 1% unemployment insurance [SANED]) and the employer (12% = 9% social insurance + 2% occupational hazard + 1% unemployment insurance [SANED]).

Retirement

  • The pension is calculated by deducting 2.5 percent of the insured’s average monthly earnings over the previous two years for each year of payments, up to a maximum of 100 percent.
  • For benefit computation reasons, the minimum monthly earnings are SAR 1 500. For benefit computation reasons, the maximum monthly wages are SAR 45 000.
  • For benefit computation reasons, the insured’s average monthly earnings cannot exceed 150 percent of the insured’s monthly earnings at the start of the previous five-year contribution period.
  • If the insured’s monthly earnings decline during the last two years before retirement, additional conditions apply to alter the average monthly earnings used to calculate benefits.
  • The monthly minimum pension is SAR 1 984.

Health

Saudi nationals and government employees have access to the country’s public healthcare system. Expats in Saudi Arabia must seek private medical attention through hospitals, clinics, and health facilities. Since 2005, non-nationals have been required to get health insurance, which must be provided by their employers.

PRIVATE EMPLOYEE BENEFITS

Workers Compensation

N/A

Retirement

N/A

Health

Private healthcare is available in Saudi Arabia.

Insurance

Private life insurance is available in Saudi Arabia.

PERSONAL INCOME TAX

Tax Year

Saudi Arabia Personal Income Tax

Returns must be filed with the GAZT within 120 days of the taxpayer’s fiscal year end. The approach is based on self-evaluation. The taxpayer’s final tax bill must be paid within 120 days after the end of the fiscal year. If the taxpayer received income throughout the year, three equal advance tax payments must be made on the last day of the sixth, ninth, and twelfth months of the current tax year.

Each advance payment equals 25% of the amount arising from the taxpayer’s tax burden based on the previous year’s return, less any withheld tax on reported income. If the outcome of the calculation is less than SAR 500,000, the taxpayer is not required to make advance tax payments. Late payment of an advance payment incurs a penalty of 1% of the amount owed for every 30 days of delay.

Tax Tables

There is no income tax in Saudi Arabia

Taxation Method

There is no income tax in Saudi Arabia.

Double Taxation

Saudi Arabia has multiple double tax agreements (DTA) with other countries.

Residence Requirements

For a taxable year, an individual is deemed a resident in Saudi Arabia if he or she fits one of the two qualifications listed below:

  • One has a permanent place of abode in Saudi Arabia and spends at least 30 days in the taxable year in Saudi Arabia.
  • In the taxable year, one must spend at least 183 days in Saudi Arabia.
  • Except in the event of a person in transit between two sites outside Saudi Arabia, residence in Saudi Arabia for part of a day is considered residence for the entire day when determining the number of days.

Payroll Calendars

Payroll is done weekly or monthly in Saudi Arabia. The employer is required to pay weekly employees once a week and monthly paid employees at least once a month.

Rebates & Tax Credits

N/A

Health Insurance

Saudi nationals and government employees have access to the country’s public healthcare system. Expats in Saudi Arabia must seek private medical attention through hospitals, clinics, and health facilities. Since 2005, non-nationals have been required to get health insurance, which must be provided by their employers.

Unemployment

In order to offer basic income security to working-age Saudi Arabians, the Kingdom of Saudi Arabia launched the Saudi National Unemployment Assistance Scheme (SNUA), or Hazif program, in 2011. The SNUA is a national Human Resources Development Fund-managed Internet-based ‘e-employment’ help initiative. Saudi Arabia’s SNAU is a targeted program offered to jobless people between the ages of 20 and 35 who have an income or social insurance benefit of more than SAR 2,000, or USD 533. Claimants must also be Saudi or have a Saudi mother and have resided in Saudi Arabia for at least 10 months in the preceding 12 months before filing a claim. Claimants must also create an electronic curriculum vitae and complete e-training courses in order to be qualified for access to an employment database that includes 400 public and private organizations. As of April 2012, the program has 1.16 million beneficiaries, with around 84% of them being women. The Hafiz regulations also offer preference to employment candidates who are handicapped. The Kingdom of Saudi Arabia invests heavily on the Hafiz e-employment aid initiative to reinforce its commitment to gender parity and youth empowerment. The unemployment insurance plan is aimed at jobless Saudi youth and Saudi nationals; however, residents and migrants are not covered. Nonetheless, the Hafiz program in South Saudi Arabia offers basic income stability to young individuals of working age and encourages employment for first-time job searchers.

Social Security

Social insurance payments are paid monthly based on the monthly basic salary plus housing (paid or in kind) with a maximum of SAR 45,000, are calculated at 2% for non-Saudi employees (note that this is not social insurance, but rather occupational hazard), and are paid by the employer. For Saudi employees, the rate is 22%, and it is paid by both the employee (10% = 9% social insurance + 1% unemployment insurance [SANED]) and the employer (12% = 9% social insurance + 2% occupational hazard + 1% unemployment insurance [SANED]).

PAYROLL ELEMENTS

Income

Salaries, wages, and allowances received by working persons are not subject to income tax.

Bonuses

13-month payments are not required by law. Employers have the option to give out incentives at their discretion.

Allowances

Allowance for moving

  • The employee in the Kingdom of Saudi Arabia receives a transfer allowance, which is the value that relates to the cost of moving the employee from the residence to the workplace in the company , which can be a set quantity or a percentage of the basic salary (10% of the basic wage), and the value of the allowance may vary depending on the agreement between the employee and the company and the working conditions.

 

Allowance for housing

  • The employee receives a home relocation stipend equal to two months’ income for a single employee and three months’ compensation for a family employee. The salary calculator on the web will calculate the pay based on 3 months of basic salary each year or 25% of the salary every month.

 

Transportation allowances range from 8% to 10% of the base pay.

Benefits in Kind

Benefits in kind are simple payments in kind and company subsidies offered for workers’ personal or social needs. Also, depending on its purpose, money provided to employees may be considered a kind benefit and may be excluded from tax and premium contributions.

Investment Income

Capital gains are taxed at the usual income tax or Zakat rate, whichever is applicable. Capital gains realized through the sale of shares in Saudi stock firms listed on the Saudi market, on the other hand, are tax free, subject to specific restrictions. Dividend income received by a resident party is liable to income tax at the standard rate. Dividends given to a non-resident person, on the other hand, are subject to WHT at a rate of 5%. Interest income is taxed at the standard income tax rate. However, interest paid to a non-resident is subject to WHT at a rate of 5%. Royalty income is taxed at the standard income tax rate. Royalties given to a non-resident party, on the other hand, are subject to WHT at a rate of 15%.

 

According to article one of the Saudi Income Tax Law, royalty is defined as follows:

  • “Payments received for the use of or the right to use intellectual rights, including but not limited to copyright, patents, designs, industrial secrets, trademarks and trade names, know-how, trade secrets, business, goodwill, and payments received for the use of information related to industrial, commercial, or scientific expertise, or for granting the right to exploit natural and mineral resources.”

Retirement Funding

  • The pension is calculated by deducting 2.5 percent of the insured’s average monthly earnings over the previous two years for each year of payments, up to a maximum of 100 percent.
  • For benefit computation reasons, the minimum monthly earnings are SAR 1 500. For benefit computation reasons, the maximum monthly wages are SAR 45 000.
  • For benefit computation reasons, the insured’s average monthly earnings cannot exceed 150 percent of the insured’s monthly earnings at the start of the previous five-year contribution period.
  • If the insured’s monthly earnings decline during the last two years before retirement, additional conditions apply to alter the average monthly earnings used to calculate benefits.
  • The monthly minimum pension is SAR 1 984.

Health Insurance

Saudi nationals and government employees have access to the country’s public healthcare system. Expats in Saudi Arabia must seek private medical attention through hospitals, clinics, and health facilities. Since 2005, non-nationals have been required to get health insurance, which must be provided by their employers.

Risk Insurance

N/A

Taxable Income

Salaries, wages, and allowances received by working persons are not subject to income tax.

Allowable Deductions

N/A

PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS

Payroll Taxes

Saudi Arabia Payroll Taxes and Employer Contributions

N/A

Unemployment

In order to offer basic income security to working-age Saudi Arabians, the Kingdom of Saudi Arabia launched the Saudi National Unemployment Assistance Scheme (SNUA), or Hazif program, in 2011. The SNUA is a national Human Resources Development Fund-managed Internet-based ‘e-employment’ help initiative. Saudi Arabia’s SNAU is a targeted program offered to jobless people between the ages of 20 and 35 who have an income or social insurance benefit of more than SAR 2,000, or USD 533. Claimants must also be Saudi or have a Saudi mother and have resided in Saudi Arabia for at least 10 months in the preceding 12 months before filing a claim. Claimants must also create an electronic curriculum vitae and complete e-training courses in order to be qualified for access to an employment database that includes 400 public and private organizations. As of April 2012, the program has 1.16 million beneficiaries, with around 84% of them being women. The Hafiz regulations also offer preference to employment candidates who are handicapped. The Kingdom of Saudi Arabia invests heavily on the Hafiz e-employment aid initiative to reinforce its commitment to gender parity and youth empowerment. The unemployment insurance plan is aimed at jobless Saudi youth and Saudi nationals; however, residents and migrants are not covered. Nonetheless, the Hafiz program in South Saudi Arabia offers basic income stability to young individuals of working age and encourages employment for first-time job searchers.

Social Security

Social Security Saudi Arabia

Social insurance payments are paid monthly based on the monthly basic salary plus housing (paid or in kind) with a maximum of SAR 45,000, are calculated at 2% for non-Saudi employees (note that this is not social insurance, but rather occupational hazard), and are paid by the employer. For Saudi employees, the rate is 22%, and it is paid by both the employee (10% = 9% social insurance + 1% unemployment insurance [SANED]) and the employer (12% = 9% social insurance + 2% occupational hazard + 1% unemployment insurance [SANED]).

Workers Compensation

N/A

ADMINISTRATION

Income

Salaries, wages, and allowances received by working persons are not subject to income tax.

Payroll Taxes

N/A

Unemployment

In order to offer basic income security to working-age Saudi Arabians, the Kingdom of Saudi Arabia launched the Saudi National Unemployment Assistance Scheme (SNUA), or Hazif program, in 2011. The SNUA is a national Human Resources Development Fund-managed Internet-based ‘e-employment’ help initiative. Saudi Arabia’s SNAU is a targeted program offered to jobless people between the ages of 20 and 35 who have an income or social insurance benefit of more than SAR 2,000, or USD 533. Claimants must also be Saudi or have a Saudi mother and have resided in Saudi Arabia for at least 10 months in the preceding 12 months before filing a claim. Claimants must also create an electronic curriculum vitae and complete e-training courses in order to be qualified for access to an employment database that includes 400 public and private organizations. As of April 2012, the program has 1.16 million beneficiaries, with around 84% of them being women. The Hafiz regulations also offer preference to employment candidates who are handicapped. The Kingdom of Saudi Arabia invests heavily on the Hafiz e-employment aid initiative to reinforce its commitment to gender parity and youth empowerment. The unemployment insurance plan is aimed at jobless Saudi youth and Saudi nationals; however, residents and migrants are not covered. Nonetheless, the Hafiz program in South Saudi Arabia offers basic income stability to young individuals of working age and encourages employment for first-time job searchers.

Social Security

Social insurance payments are paid monthly based on the monthly basic salary plus housing (paid or in kind) with a maximum of SAR 45,000, are calculated at 2% for non-Saudi employees (note that this is not social insurance, but rather occupational hazard), and are paid by the employer. For Saudi employees, the rate is 22%, and it is paid by both the employee (10% = 9% social insurance + 1% unemployment insurance [SANED]) and the employer (12% = 9% social insurance + 2% occupational hazard + 1% unemployment insurance [SANED]).

Workers Compensation

N/A

Statutory Benefits

Statutory benefits are mainly for the citizens of Saudi Arabia yet it is mandatory for companies who employ expatriate workers to provide the equivalent.

Employee Benefits

Certain benefits are mandated by law . Saudi Arabia has 9 public holidays on which employees are excused from work, and 21 days of leave per year.  Employees are granted up to 4 months of sick leave.   Maternity leave is 10 weeks and paternity leave is 3 days. 

LEGISLATION

KSA Labour Law

  • As an Islamic state, Saudi Arabia’s judicial system is founded on Islamic law (Shari’ah) for both criminal and civil disputes. The King is at the apex of the legal system, serving as the last court of appeal and a source of pardon.

STATUTORY BODIES

  • General Authority of Zakat and Tax (GAZT)
  • The General Authority of Customs to form the Zakat
  • Tax and Customs Authority (ZTCA)

Social Security Fund 

Zakat, Tax and Customs Authority