Since the last few months, a new fear has gripped the expat community in KSA: having to pay fees on sending money home or being forced to spend money within the kingdom.
If we recall similar fears were resonating before the new EJAR system was launched and before the dependent fee was imposed. So the question is: Is this news about remittance regulations the last straw to break the camel’s back?
Here qSaudi investigates the basis of this news.
What does restriction on foreign remittance mean?
Many countries see the transfer of money by expat workers back to their home countries as a drain of wealth. They have tried to somehow stop this money from going overseas by either imposing fee on it or by making it compulsory to spend a certain percentage of income within the country. Example: USA has a foreign account tax and Kuwait recently imposed tax on foreign remittance.
Is there a possibility KSA will implement a fee on remittance?
In May this year the media reported that Saudi Arabia witnessed an out flow of $38 billion as remittance in 2017.
Now, while charging a fee on all that money seems like an easy way to fill the government treasuries, (Kuwait recently made 230 million USD) it is not feasible.
Al Rajhi bank in August reported that the exodus of expats would harm its returns from foreign remittance. Now if a fee is imposed, it will only increase the exodus and further harm the economy. Thus it seems less likely that it will be implemented.
Authorities have denied the Rumours
- On 4 September Ministry of Finance denied the rumors
- Dr. M. Al Abbas economic analyst and member of Shoura denied the rumors.
- It contradicts Vision 2030’s aim at attracting foreign investors.
What is the real problem for KSA in foreign remittance?
As explained by economic analyst Dr. Muhammad Al Abbas, the main problem is that the Saudi reserves come under great pressure due to the remittance process. This is because outward money is first converted from SAR to USD then transferred. It is actually this hegemony of the Dollar that harms KSA banking system.
What Should Expats do?
At this point, there is no need to panic. As and when Saudi does implement such a tax on foreign remittance, it will not be the first country to do so. Also, it is better to stay informed of why such charges are put in place. There is no need to fall for conspiracy theories and expats should instead make themselves aware of how the monetary system works.
If we think logically, there are ways of avoiding huge taxes on foreign remittances. One way is to spend as much portion of the money as possible within KSA in a wise manner. This way the portion of the money to be sent for foreign remittance is minimized in the long run. Moreover, one can grow money ethically by investing in regional businesses and investment opportunities. Finally, cutting on unnecessary costs goes a long way to compensate for the tax that might be expected on the foreign money transfer.
In any case, there is no need to worry as currently, no such tax is likely to be imposed.