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Payroll in Saudi Arabia – 2022 Updates
In January 2022, the General Organisation for Social Insurance (GOSI) announced that the contribution of the employer and the beneficiary in the “Saned” Unemployment Insurance Program has been reduced from 2% to 1.5% of the beneficiary’s wage. The organization has also made amendments to Articles 9 and 21 around the registration and contributions to the insurance program. Learn more here.
Saudi Arabia Payroll – Basic Facts
The official currency in Saudi Arabia is the Saudi Arabian Riyal (SAR). Arabic is the official language of Saudi Arabia, but English is widely spoken.
In Saudi Arabia workers who are paid daily should be paid at least once a week according to the employment laws. Workers who are paid on a monthly basis should be paid once a month. If the work is done by the piece and requires a period of more than two weeks, the worker should receive a payment each week commensurate with the completed portion of the work. 13th-month payments are not mandatory.
Income Tax
The tax year in Saudi Arabia runs from January 1st through to December 31st.
In Saudi Arabia there is no individual income tax scheme. Income tax is not imposed on individual earnings (personal income) if they are gained only from employment in Saudi Arabia.
The income tax rate is 20% of the net adjusted profits. Withholding rates are between 5% and 20%. Zakat is charged on the company's Zakat base at 2.5%.
Zakat
Saudi Arabian interests and citizens of GCC countries pay zakat, which is a religious wealth tax based on the taxpayer's net worth, not income. The effective rate is 2.5% of the net worth of natural persons and 2.5% of total capital resources of companies.
Social Security Tax
- Employee contributions: 10% = 9% social insurance + 1% unemployment insurance
- Employer contributions: 12% = 9% social insurance + 2% occupational hazard + 1% unemployment insurance
Corporate Tax
The standard corporate tax rate in Saudi Arabia is 20%.
Capital Gains Tax
The capital gains tax rate is 20%.
Withholding Tax
- Dividends: 5% unless the rate is reduced under a tax treaty.
- Interest: 5%
- Royalties: 15%
Value Added Tax
The standard VAT rate in Saudi Arabia is 5%.
Compensation and Benefits
Minimum Wage
The official minimum wage in Saudi Arabia in 2022 is 4,000 Saudi riyals per month, equivalent to 1,065 US dollars.
Overtime
For the first 2 hours of overtime, employees receive 150% of their usual wage. For all additional hours, employees are paid 200% of their usual wage.
Hours of Work
In Saudi Arabia the working hours are 8 hours daily and 48 hours per week.
Holidays
There are 9 official public holidays in Saudi Arabia in 2022.
- 23rd May to 27th May – Eid Al Fitr Holiday (End of Ramadan)
- 29th July to 2nd August – Eid Al Adha Holiday (Feast of the Sacrifice)
- 23rd September – The Day of the Unification of the Kingdom (Saudi National Day)
Leaves
• Annual Paid leave – For employment more than 1 year with the same employer, employees are entitled to 15 days of paid annual leave per year. For more than 10 years of employment, the entitlement is increased to 21 days of paid annual leave per year. Employees are also entitled to 10 days of unpaid leave per year, in agreement with the employer.
• Maternity leave – Female employees get 10 weeks of leave that can begin no earlier than 4 weeks from the expected due date. If the woman has been employed for at least 1 year, maternity leave is paid at the rate of 50% of the regular pay. Employees with at least 3 years of service are entitled to paid maternity leave, at the rate of 100% of the regular pay.
A woman will not be paid for regular annual leave if maternity leave is taken within the same year that full pay for maternity leave is received and will only receive payment of 50% of annual leave pay when maternity leave is also at 50% of the regular pay.
The expenses of medical examination and the costs of treatment and delivery are borne by the employer.
• Paternity leave - Employees are entitled to 1 day of leave with full pay for the birth of a child after providing a documentation.
• Sick leave - 90 days of sick leave per year with a medical certificate (first 30 days are with full pay and for the next 60 days, employees are entitled to receive three – quarters of their regular pay).
• Bereavement leave - one day of leave with full payment.
• Military leave - If the employer initiates termination of employment or the employee resigns due to military service or due to force majeure, the employee is entitled to a severance pay – half a months’ salary for each year of employment up to 5 years and 1 months’ salary for every year after.
The Ministry of Human Resources and Social Development has clarified that an employee who wants to terminate the work contract must have a notice period of 60 days in advance if the period of the contract is unlimited and the employee receives the wage on a monthly basis.
Foreign workers in Saudi Arabia
Foreigners doing business in Saudi Arabia need an investment license issued by the Saudi Arabia General Investment Authority (SAGIA). It allows you to invest in the country, buy or establish a new company or set up a foreign branch.
Visa Requirements
Expats are required to have the proper visas and work permits in Saudi Arabia. A Saudi Working Visa allows you to stay in Saudi Arabia for 3 months, on a single-entry visa. You must have an employment contract along with other various requirements before you apply. The Temporary Work Visit Visa allows temporary work in Saudi Arabia under certain conditions. The visa allows foreign nationals to conduct work in Saudi Arabia for up to 90 days each year, provided they work for a visa-sponsoring entity.
Taxes
A non-resident person with no permanent establishment who derives income from a source in Saudi Arabia is taxed based on the withholding tax rates ranging from 5% to 20% depending on the nature of the service.
For more information about how our Global Payroll Control Platform integrates with local payroll providers in Saudi Arabia, contact us today.