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Employee Expense Reimbursements in Saudi Arabia

We have a client who operates in Saudi Arabia, and they had a query about expense reimbursement to their employees on assignment in that country. Saudi Arabia has a number of unique employment and payroll rules, so they wanted to know the best way to handle expenses and still stay in compliance.

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Reimburse Expenses Directly or Through Local Employer?

Our client’s preference was to reimburse expenses directly to the employee, rather than pay the amounts through the local employer of record.  In some countries, this will not work, since certain types of allowances or reimbursed employee expenses are taxable income.  So, often the expenses have to be included in the local payroll, and can’t be separated.

However, the good news for our client was that there is no personal income tax at all in Saudi Arabia, so that means expense reimbursement can be made directly to the employee without breaking any tax or payroll rules.  In other words, all types of expense reimbursements are tax free for the employee.

We assured them that reimbursing expenses direct to the employee would not raise any issues in Saudi Arabia with authorities, and that will hold true for any company with employees assigned to that country.

Why Does Shield GEO Focus on Compliance Issues?

Our priority is to make sure that our clients’ employees on foreign assignment meet all of the local rules and regulations for payroll and employment.  Compliance is the biggest challenge for multinationals working in multiple countries, and is one of the reasons that they ask us to handle their local employment of workers.

We see it as our role to stay on top of any changes in local laws or employment regulations so that our clients don’t have to, and can focus on business activity.  If you have questions about employment or payroll compliance in any country, we can give you a quick answer of local rules and our GEO solutions.

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