Yesterday, April 15th, came and went without any fanfare here in Saudi Arabia. There were no outrageously long lines at the post offices, no people griping about getting all those complicated forms filled out to file their taxes. Taxes are virtually non-existent here in Saudi Arabia. There are no property taxes, no capital gains taxes, and even at the grocery store, you pay exactly what an item's price says and not a Riyal more. You don't have to make sure you have that extra additional cash in your wallet to cover the usual 5-8% of sales taxes.
The Kingdom of Saudi Arabia holds twenty five per cent of the world's oil reserves, and most of its fiscal operating budget capital comes from these profits. Individual workers here pay absolutely no income tax - period. Ex-pat workers from the US must still pay their US taxes, however generally speaking in most cases, the first $80,000 of income or so earned outside of the country is tax exempt. Foreign ex-pat workers are also given an automatic filing date extension of an additional two more months to get their paperwork submitted. However since each person's situation is different and tax requirements and payments can vary and I am no tax expert, please refer to the IRS website to determine what taxes you may owe if you are an ex-pat worker in Saudi Arabia or any other country.
One thing that Saudi Arabia does have is something called Zakat, which is a religious tithing of sorts, and alms for the poor, if you will. It is actually one of the five basic pillars of Islam - to give a small percentage (2.5%) of 15% of your profits (it's not based on your gross income) each year to those less fortunate. This is a flat-rate and is not based on any type of sliding scale and there are no loop-holes. Zakat makes up the majority of the income each year that Saudi Arabia receives that is not oil-based. There is also another form of Zakat that Muslims are encouraged to pay during the month of Ramadan, when Muslims fast during the daylight hours, among other things, to gain a better appreciation for those who don't have enough to eat. This Zakat ul-Fitr is given in the form of food.I recently did a post listing many food prices here in the Kingdom so you can compare with your area. Here's the link in case you missed it. It's actually a nice feeling paying exactly what the sticker price says and not having to try to figure out how much more in taxes you will have to pay!
How nice!
ReplyDeleteHi Susie,
ReplyDeleteThat's why the U. S. has to find a way to become "less" dependent on foreign oil!!!! Hopefully that will happen in my lifetime! Sorry about the comment, maybe I'm jelous?! Love you. Annie
It would certainly be nice to not to have to pay taxes, and I think a lot of those taxes that we do pay are wasted. I wish it were otherwise. But the taxes we pay go to support a lot of things that make this country a great place to live. I would rather pay taxes and be able to jump in my RV and drive wherever I want, and if I want to go have lunch with a man who's not my relative, it's nice to be able to do so without worrying about getting hauled off to jail. You pay your price to live where you do, and I pay my price. Fortunately we do have that choice.
ReplyDeleteHi Susanne - Thanks for commenting.
ReplyDeleteHi Annie - Thanks for your comment and no apologies necessary. I totally agree that the US should definitely explore other options so it's not so dependent on foreign oil.
Hi Betsymn - There is definitely a high cost in the form of trade-offs in living here. I'm just trying to point out something I thought is interesting about this place and that other people may not realize. Personally I would rather have those freedoms instead of not having to pay taxes here! Thanks for your comment.
Hi Susie
ReplyDeleteSo, is the Zakat monitored by the Government? You said that the Zakat makes up the majority of income that Saudia Arabia receives that is non-oil. What does this mean? I actually never have thought of this but how does a country operate without a system of taxation??? Great post.
The Saudi Gov't received most of its operating income from oil revenues. Aside from that, the next highest income it receives is from Zakat. For individual Muslims this is done mainly by an honor system. Many Muslims choose to give their Zakat directly into the hands of someone that they themselves see is in need. Accounting for this type of Zakat is impossible. Other people give directly to the Dept of Zakat, but even then, I don't know that there are records or receipts to show who gave and how much. This dept ensures that the Zakat funds it receives are distributed accordingly. The systems in place here would never work in a country like the USA. I did find a website but it was hard finding specifice info on the details of how it is all done: http://www.dzit.gov.sa/en/GeneralInfo/generalinfo1.shtml
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteAdmittedly, I'm a teeny bit jealous after paying $1400 yesterday in taxes. We were going to hold off, but discovered that making payments meant paying 10% and after week 25% of the total. So we paid in full and our check is in the mail.
ReplyDeleteAnd yet I don't even have health insurance, a house, well you get my drift, dear. I'm really glad you guys were able to avoid all that yesterday. The local news did the usual "last minute people mailing tax returns at the post office bit." It's as though they can't come up with any other stories :)
Lots of love, Lisa.
I think the interesting point in your article is that people willingly (or via religious pressure) donate a set amount to the poor. Is this enough for the poor? I would be interested in seeing this side of the country.
ReplyDelete"I want to go have lunch with a man who's not my relative, it's nice to be able to do so without worrying about getting hauled off to jail."
ReplyDeleteAll other members of the GCC (especially Bahrain, but also Kuwait, UAE, Oman and even Qatar to an extent) offer this freedom and none have income taxes either.
Typical American arrogance.
Abid said...
ReplyDeleteAll other members of the GCC (especially Bahrain, but also Kuwait, UAE, Oman and even Qatar to an extent) offer this freedom and none have income taxes either.
Typical American arrogance.
Is this typical Middle Eastern hate?
Forgive me for making a point. I find blanket condemnation so offensive. As I'm sure you do, as well.
Hi Lisa - Sorry about the big chunk of change you had to come up with for your taxes. Just doesn't seem right with all the big execs taking hugely gross salaries and bonuses and then having loopholes or tax breaks to get out of paying their fair share.
ReplyDeleteHi Mo - I honestly don't know, but I do see many very poor people here - mostly foreigners.
Hi Abid - I don't think Betsymn was being arrogant about her statement. She was merely saying that if she had her choice, she would rather pay taxes than sacrifice many of the freedoms she has like driving and socializing with the opposite sex. I think you read something into her statement that is not there.
Hi Anonymous - Thanks for your comment. I couldn't have said it better myself.
KJust found you from Prescott; Great Blog!
ReplyDeleteThe other GCC states are pondering the possibility of taxes as we speak. Saudi is too large a player in the oil business to worry about alternative sources of fiscal revenues.
ReplyDeleteI have to come to Abid's defense just a bit. I lived in the UAE for five years and as you know people wear western clothes (even shorts and halter tops),women drive, there are liquor stores, stores sell pork etc. etc. Abu Dhabi and Dubai are gorgeous contemporary cities etc.
ReplyDeleteI came home with pictures, books, stories and experiences that I have shared over and over and people refuse to believe me! After all I shared they will say the equivalent of "how could you live in a tent in the desert with terrorists?" It is discouraging and exhausting when people do not want to know because they prefer their ignorant stereotypes.
Yes, I will choose freedom over taxes however I prefer my taxes to go to health and education!
And I don't think what Abid said was out of "hate". Perhaps just frustration.
And I also don't think one of our constitutional freedoms is unrestrained energy consumption!
Hi Abu Dhabi Blogger,
ReplyDeleteIs it ? Are you considering the implementation of an income tax ? what sort of ?
Regarding the Zakhat, it's a sort of tax on your property, not on your income, as far as I know. But if you aren't muslim, you are not supposed to pay for it.
No taxes also mean no rights for accountability. If you pay, you have a say. I say no to freedom from taxes when that means no freedom to choose or change the government.
ReplyDeleteLike the others, I'm jealous, too. Our taxes will have to go up now with our economy in such a terrible fix.
ReplyDeleteTax-free income is the main attraction behind expatriaets coming to the MiddleEast. Didnt know Americans should pay it even if they are not in the US. Thats weird.
ReplyDeleteLike Abu Dhabi bloger mentioned, they are planning to bring taxes in other ME countries. They have already implemented the Value Added Tax (VAT) in the UAE which is due to begin sometime next year.
hi susie hope your ok and well just to let you know your post on katy perry was used by perez hilton oh his site thought i would just let you know as i am a regular reader of yours, also just to let you know becareful what you post as there are hurtful people who are ignorant when it comes to islam, anyways love your blog take care peace siouxsie
ReplyDeleteHi Susie, stumbled across your blog and found it very interesting. My husband lived and worked in Saudi for a number of years, I stayed in the UK due to our sons schooling. I've heard my husband's take on life in KSA and it's good to read others.
ReplyDeleteI'm not sure that I could make such a life change.....you're very brave!
About Zakat,
ReplyDeleteThe Zakat is calculated by taking 2.5% of youre savings for the year. Example( if i start out the year in january with 100$ and later in the year i make another 100$, so now i have 200$ later i have alot of spending and i go down to 50$, later i make more money and end up with 10,000$ by december. in the end, the money that made it from january to january is 50$(my lowest point of the year).
so the zakat is taken to be 2.5% of the 50$ and my 10,000$ is not affected (it will depend if that money stays saved for another year).
As Susie said, its based on an honor system, hence no one will be knocking on your door asking for it. However, the zakat is one of the 5 main pillars of Islam so not paying it is a grave sin.
In saudi you would expect with all the multi billionairs around 2.5 of 1Billion is 2.5 Million (no small amount) there shouldnt be any poor people on the streets. However sadly, it would seem some people are (maybe) skipping out on thier zakat.
On the other hand, there are some people in Saudi who have made a buisiness out of street begging. There are many stories of people who have left thier good paying jobs cause street begging makes more! I saw a TV program where the reporter stands in the streets pretending to be a beggar, in an hour he was able to make 100$. so, if he did this as a full time job, 8 hours a day, 5 days a week you get 4000$!!!
Sorry for the long post but thought people may be interested.
Does Zakat then go to help the poor? I think that's great!
ReplyDeleteHere in Sweden we have some of the highest taxes in the world...
Also, we don't practice the art of tipping. It's culturally acceptable not to, but that doesn't mean we are stingy. I like not feeling obliged to pay someone an amount of money I'd prefer putting elsewhere. My philosophy is that excess money should go to charity. But of course my human greed gets in the way of that every now and then. And then, there's the whole issue of being precieved as cheap that results in some people wasting money in certain situations just to show off their wealth/generosity.
ReplyDeleteI'm glad that Simple Saudi explained the zakat. And yes, it goes to the poor. There are categories which define who exactly is eligible for zakat.
ReplyDeleteAlso, that 2.5% required for zakat is the bare minimum that's required to "purify" your money. It is very much encouraged to give voluntary charity beyond that (called sadaqah), and most Muslims give much more than just their zakat.
Another Anonymous
One other point about zakat... it's considered a RIGHT of the poor over those who have more than enough.
ReplyDeletejealousy kills the camels .......... and left it a parts
ReplyDeleteThe understanding of Quran comes with time and, of course, with divine acceptance, i.e., if Allaah considers a person worthy of being given the knowledge. zakat calculator
ReplyDeletethats right its time to settle in saudi arabia
ReplyDeleteGood luck if you are a kafir (unbeliever) .
ReplyDeleteZakat is a great and unique financial system. Muslims can make their society and states beautiful by zakat.
ReplyDelete