Foreign companies that employ workers in Saudi Arabia face several challenges and must adhere to the legal and regulatory framework that is in place. Most notably there are restrictions depending on the type local entity they have incorporated, especially regarding termination and leave. In some cases, using an outsourced employer will make the process smoother, and it is recommended to use professional legal services as well. Our guide explains Saudi Arabian policies on leave, termination and payment of benefits.
Complying with local payroll and tax requirements is essential for a company doing business Saudi Arabia. Issues such as business tax rates and withholding and social security are all essential in ensuring a seamless human resources operation. Many companies should consider outsourcing these administrative tasks to Shield GEO (Global Employment Organization).
Foreign workers are required to have the proper visas and work permits in Saudi Arabia, as established by immigration laws. This often requires incorporation and licensing prior to sponsoring work permits for employees, which can be a problem if your company is trying to enter the country quickly. The most common work permit is called an employment visa.
There are several business structures available for incorporation in Saudi Arabia, and each has advantages and disadvantages. In some cases it will depend upon the type of industry that you are in, and the scope of planned business activity. Our guide has a comparison of the time and cost for incorporating standard company structures.
Companies entering Saudi Arabia must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Saudi Arabia Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Saudi Arabian entity established that can run payroll.
A DIY approach will typically be delayed until there is a properly incorporated entity ready to run payroll and will require registered capital (minimum SAR 500,000) for a subsidiary LLC. If foreign nationals are to be employed the process can take 5 months or longer for employers applying for the first time.
Shield GEO can deploy foreign staff in 6-8 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.
|Management Fee for Employer of Record Services / Monthly Payroll Costs||
Please contact us for a quote
Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. There is no income tax, but employers social security called General Organisation for Social Insurance (GOSI) is deducted at source and paid to the local tax authorities. Where foreign workers are employed there is a Saudisation liability. Additionally End of Service Benefit (EOSB) is accrued each month.
|Tax Returns Supplied||
|Corporate Tax Requirements||
Tax filings are based on the fiscal year of the company and the tax return is due within 120 days of the fiscal year end. Tax returns are submitted to the Department of Zakat and Income Tax (DZIT). If a Saudi citizen has any ownership stake the company must also file audited financial statements with the tax return.
Corporate tax is paid quarterly based on previous years estimates (assuming total annual tax payment is greater than SAR 500,000) and the final tax installment is due within 120 days of the companies fiscal year end.
|Employers Social Security and statutory contributions||
GOSI – employers social security is calculated on a monthly basis. The rate is 2% for expats and 12% for Saudi nationals.
It is assessed based on the total monthly remuneration in the following categories (subject to an upper limit of SAR 45,000 per month).
1. Basic wage
2. Housing allowance
3. Commission payments
Saudisation requirements may apply for employers where less than 50% of employees are Saudi nationals
|Employees Social Security and statutory contributions||
GOSI of 10% applies to Saudi nationals
There is no GOSI or employees social security for foreign nationals
|Corporate Income Tax Rate||
20% of net adjusted profits.
Withholding Tax is applied to payments to a non-resident party.
Dividend WHT 5%
Interest WHT 5%
Royalty WHT 15%
These figures can be reduced by treaty agreements. Withholding Tax is payable within 10 days of the month following the initial payment.
|Can Sponsor Work||
|Can do Business Visa||