If you have decided to look for clients in Saudi Arabia, you will want to understand how the immigration, tax and residency requirements will be applied. A contractor in Saudi Arabia may work as self-employed, through a limited company or become an employee of their client. If you prefer to stay in your home country, remote work in Saudi Arabia may also be available for some online roles. These decisions will affect all areas of compliance, and this guide will walk you through your options.
What visas do I need to be a contractor in Saudi Arabia?
You will need a work permit in Saudi Arabia, with the key requirement of a local sponsor. That is simple if you are your client’s employee, but more complicated if you are self-employed. The sponsor of your work permit can be either an individual or a company, and most sponsors will charge you a fee. The fee may be a flat rate or a percentage of your earnings, which you can negotiate ahead of time.
How do I get paid as a contractor in Saudi Arabia?
You have a few choices when it comes to getting paid as a Saudi Arabia contractor. Your ultimate choice will depend on how you structure your business and your client’s preferences.
Work as a self-employed freelancer
You can work as a self-employed in Saudi Arabia, where you invoice your client directly based on hours worked or project completion. They would pay you to a local or foreign account like any other client. You would have to ask your client to sponsor your work permit, for which they will charge you a fee. There is no self-employment visa available. As a self-employed you may also be subject to income tax, so you might prefer to work as an employee of your client.
Set up your own limited company
It is possible to set up as a limited company and then lease yourself out to the client. Your limited company would bill the client and receive payment on your behalf. If you go this route there is potential corporate tax, so it’s not an advantage unless you have numerous business deductions.
Work with an umbrella company in Saudi Arabia
The easiest way to get paid is to work with an umbrella company in Saudi Arabia. The umbrella company is a third-party intermediary to your contract and facilitates all payments and any withholding. They will ensure that you stay in compliance, and can also mediate any conflicts with the client that might arise. Technically, you would be considered an employee of the umbrella company, so no income tax would be withheld.
The umbrella company can also sponsor your work permit, allowing you to work with several Saudi clients at once. If you change clients, the same work permit could be used.
How do taxes work for contractors in Saudi Arabia?
Like most Arab countries, Saudi Arabia does not levy income taxes on individuals. But that rule may not apply to a contractor in Saudi Arabia, especially if they are using a limited company. It will depend on your residency status and business type, so expert tax advice will be needed to calculate and file taxes in Saudi Arabia.
There is no personal income tax levied on earnings for tax residents in Saudi Arabia. But non-residents (less than 183 days) who derive income from Saudi Arabia are subject to tax withholding of 5-20%.
Tax residency rules in Saudi Arabia
Saudi Arabia uses the standard 183-day rule (in a year) for tax residency unless you have a permanent residence and then it is 30 days in a year. As an individual, it is beneficial to be a tax resident as there is no income tax or withholding for residents unless you are a company.
How to file taxes in Saudi Arabia
There is no personal income tax (employment tax) in Saudi Arabia. However, non-residents conducting a business activity or deriving income from a permanent establishment in Saudi Arabia will be taxed as a ‘corporation’. To file taxes in Saudi Arabia as a corporation, the following steps apply:
- Register as a new user for the Saudi Arabian Tax & Income Department portal here: General Authority of Tax and Income
- Then, log in to your taxpayer account, using the username and password that you created.
- Select ‘Tax return service’.
- File the tax return using form No. 4
- Attach the supporting documents required.
- Review and acknowledge the authenticity and accuracy of the information provided. Click ‘submit’. You will then receive a delivery acknowledge notice and invoice number.
- Pay any tax due within 120 days of the end of the tax year.
What are the social security contributions in Saudi Arabia?
Non-Saudi workers only pay a 2% rate on monthly income for occupational hazard coverage. No other contributions are required from ex-pats.
Can I work remotely for a company in Saudi Arabia from my home country?
With the advent of online roles, remote work in Saudi Arabia from your home country is also an option. This gives you the same professional opportunity without all immigration and compliance steps. You would just invoice your Saudi client like any other, with no additional tax or regulatory steps to take. You can also work through an umbrella company located in your home country to give you more certainty in the billing and payment process.
How do I stay compliant while contracting in Saudi Arabia?
When you are ready to begin contracting in Saudi Arabia, compliance will be a paramount concern. Whether it’s work permits, tax withholding or banking, it helps to have a local partner involved in the process. This is where an umbrella company can be invaluable, as they are already set up and ready to facilitate your client contract, invoicing and payments.
This takes the guesswork out of the most important part of your contracting journey: receiving accurate and timely client payments into the account of your choice.
Other benefits of umbrella companies include:
- Manages all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalisation and double taxation treaties
If you have questions about how an umbrella company can help you as an international contractor, please contact us at Contractor Taxation.