Saudi Arabia payroll and tax overview.

Your guide to doing business in Saudi Arabia

Doing Business in Saudi Arabia

One of the largest and most populous states in Asia and the Arab world, Saudi Arabia represents a major international business destination. A gateway to the Middle East, Saudi Arabia lies between the Red Sea and the Persian Gulf, and shares land borders with numerous Arab states, including Kuwait, Qatar, Bahrain and the UAE. Saudi Arabia’s economy was historically agriculture-based, thanks to the nomadic lifestyle of much of its population, but after the discovery of substantial petroleum deposits in 1938, the country’s financial influence expanded, and it became one of the world’s most prolific oil producers.

Today, Saudi Arabia’s GDP stands at over $646 billion, with oil production providing the backbone of the economy and comprising around 90% of export earnings. Recently, the Saudi government has made efforts to diversify by stimulating its small mining and agricultural sector - but infrastructure surrounding oil and gas continues to provide the vast majority of its commercial interests and development efforts remain concentrated here. With an ongoing annual growth rate of around 3%, Saudi Arabia’s oil wealth has driven its international economic profile and it is a member of the G20, OPEC, and the Gulf Cooperation Council. Saudi Arabia is currently ranked 94 on the World Bank’s Ease of Doing Business Survey 2017.

Why invest in Saudi Arabia?

Interested investors may choose Saudi Arabia for a number of reasons, including:

  • Oil Opportunities: The petrochemical industry continues to drive Saudi Arabia’s economic growth - but the industry also creates a range of peripheral opportunities across the business landscape, including in mining, hospitality, health, and leisure. The Saudi government recently announced plans to invest around $47 billion in three ambitious petrochemical projects.
  • Infrastructure Improvements: Saudi Arabia’s businesses are served by modern, and continuously improving transport, energy, and communication infrastructures, which are expected, to be part of an estimated $1,000 billions of collective investment over the next 20 years.
  • Incentives for FDI: The Saudi government has established a number of incentives for foreign investors, including the Saudi Arabian General Investment Authority (SAGIA), which assists businesses in obtaining set-up approval. SAGIA also delivers various extra benefits, including lower capital requirements, 100% foreign ownership, tax incentives, employee visa assistance, and more.
  • Expat Lifestyle: Saudi Arabia offers expatriate workers a safe, comfortable, and often luxurious lifestyle, with an abundance of leisure facilities and amenities. Employees moving families into the country will find numerous highly rated English and International schools.
  • Advantageous Location: Saudi Arabia is located at the heart of the Arab world, and benefits from lucrative trade connections across the region. Saudi Arabia’s free trade agreements include the Greater Arab Free Trade Area, and the European Free Trade Association. International ports and airports across the country connect with the Arabian Peninsula, Asia and the rest of the world.

Working Week in Saudi Arabia

The typical working week in Saudi Arabia is Sunday to Thursday from 9am to 6pm. Friday is the only official weekend day and Saturday is often a working day for the construction and service industries.

Banking in Saudi Arabia

It is mandatory to have an in-country bank account to process payments in Saudi Arabia. All government levies must be paid through a government payment channel SADAD. SADAD payments can only be initiated from Saudi Arabia based bank accounts.

As at 2017, all entities with more than 10 employees are required to process their payroll payments through Wage Protection System (WPS).

Basic Facts about Saudi Arabia

General Information:

Civilisation in the territory now known as Saudi Arabia dates back over 100,000 years, and was characteristically tribal and nomadic until Islamic society began to coalesce in the 6th and 7th centuries AD. Subsequently ruled by a variety of Arab dynasties and political powers until the 20th century, the Kingdom of Saudi Arabia was founded in 1932 by Ibn Saud, who united the four regions of Hejaz, Najd, Eastern Arabia, and Southern Arabia. The discovery of oil and gas deposits within the kingdom propelled it onto the world stage, and quickly made it a significant international commercial interest. Today, Saudi Arabia remains a hereditary monarchy, with an economy based on its lucrative oil production industry. As the location of Mecca, Saudi Arabia holds a central place in Arab and Islamic culture, and is otherwise a country of predominantly desert landscapes, surrounding settlements and highly populous urban centres. Saudi Arabia holds a variety of desert animals, including gazelles, leopards, and hyenas, while its climate is hot and dry throughout most of the year, with an annual monsoon season between October and March.

Official Name: Kingdom of Saudi Arabia

Population: 32.28 million (World Bank, 2016)

Capital: Riyadh

Main Exports: Petroleum and petroleum products

Main Language: Arabic

Main Religion: Islam

Monetary Unit: Saudi Riyal (SR)

Internet domain: .sa

International Dialling Code: +966

Useful Phrases in Arabic

Hello (As-Salām 'Alaykum) مرحب

Good Morning (Ṣabāḥul KẖAyr) صباح الخير

Good Evening (Masā' Al-Khayr) مساء الخير

Do You Speak English? (Hal Tatakallam El-Ingliziyya) هل تتكلم الانجليزية

Good Bye (Bāy Bāy) باي باي, (Ma`A As-Salāma) مع السلامة

Thank You (Shukran Jazīlan) شكرا جزيل (Shukran) شكرا

See You Soon! (Ashoufak 'Ourayyeb)


Dates are usually written in the day, month and year sequence, for example, 12 July 2017 or 12/07/2017

Income Tax & Social Security in Saudi Arabia

Saudi Arabia does not impose an income tax on income earned within Saudi Arabia - although corporate income tax is charged at a rate of 20% for foreign investors in a Saudi company. Withholding tax is due from non-resident foreign investors who provide services to resident companies - and charged at rates of 5-20%.

Saudi citizens (and other GCC citizens), and Saudi companies, must pay the Islamic Zakat tax, which is set at a rate of 2.5%.

Social security contributions are paid to the General Organisation for Social Insurance (GOSI) and are due from employees and employers in Saudi Arabia, based on salary amounts.

Income Tax in Saudi Arabia

As previously stated, no income taxes are imposed at a local, state, or provincial level in Saudi Arabia. The Islamic Zakat tax is imposed on native Saudi citizens, and charged at a rate of 2.5% on capital assets.

Health Surcharge in Saudi Arabia

Social Security in Saudi Arabia

Saudi Arabia’s social security system provides benefits for insurance, old age, injury and disability, and to survivors in the event of an employee’s death. Female workers are entitled to 10 weeks of paid maternity leave, which may be extended for a further unpaid month. Contribution rates are as follows:

  • Employees contribute to social security at a rate of 10% (9% social insurance, 1% unemployment insurance).
  • Employers contribute at a rate of 12% (9% social insurance, 2% occupational hazard insurance, 1% unemployment insurance).

Foreign workers are not entitled to statutory social security benefits and should make their own arrangements with an insurance organisation operating in Saudi Arabia.

New Employees in Saudi Arabia

Once an employment contract has been signed, new employees in Saudi Arabia must be registered with GOSI, and inducted on to company payroll. Registration can take place online through the dedicated GOSI portal.

Probation periods for new employees in Saudi Arabia are required by law to last no longer than 30 days - but can be extended up to 180 days in certain circumstances.

Leavers in Saudi Arabia

Employees who leave their positions in Saudi Arabia may also be de-registered from GOSI using the online portal. During notice periods, employees must receive up to 8 full-paid work hours per week, or alternatively, receive one full day per week to find new employment.

Employers must be able to demonstrate justification for terminating employees. Valid reasons include misconduct, absence, or probationary issues.

Payroll in Saudi Arabia

Employers in Saudi Arabia have certain obligations during the payroll process, including withholding tax and social security contributions. While no income tax is generally due on employee wages in Saudi Arabia, social security contributions and nonresident withholding taxes (WHT) must be paid.

  • Social security contributions (GOSI) are charged at a rate of 10% to Saudi nationals.
  • WHT is paid at a rate of 5-20%

It is legally acceptable to issue employees with online payslips in Saudi Arabia, and payroll reports must be kept for a minimum of 7 years.