Saudi Arabia Taxes for US Expats: Everything You Need to Know

Living as an Expat in Saudi Arabia

Saudi Arabia provides U.S. professionals with abundant career opportunities — especially in the oil and gas, technology, and energy sectors — which is why thousands of U.S. expats choose to relocate there yearly. If you’re among them, it’s vital that you familiarize yourself not only with this nation’s rich culture but also with Saudi Arabia’s taxes for U.S. expats.

As a U.S. expat living in Saudi Arabia, you’ll pay no taxes on employment income. That’s right — the income tax rate Saudi Arabia charges residents and expats is zero.

The lack of an income tax and favorable investment income tax laws makes Saudi Arabia an appealing destination for U.S. expats. Still, there are a few things you need to know to reduce your U.S. tax liability and avoid running afoul of the IRS.

Saudi Arabia Taxes at a Glance

US Expat Taxes in Saudi Arabia

The tax rate for foreigners in Saudi Arabia is zero. This holds true whether you’ve established residency or not.

That doesn’t mean you’re exempt from all income taxes, though. As a U.S. citizen, you must file a tax return with the IRS and, if necessary, pay income taxes.

Americans living abroad are subject to many of the same tax requirements as those residing within the U.S., as the United States engages in citizen-based taxation. Simply put, all U.S. citizens must follow U.S. tax laws, regardless of where they reside.

As part of these requirements, you must claim all worldwide income on your U.S. return and pay the requisite taxes.

Who Has to File Taxes in Saudi Arabia?

Only corporations and business owners have to file taxes in Saudi Arabia. For the most part, Individuals deriving income from wages or investments typically do not file.

While you won’t have to file any Saudi Arabian taxes unless you’re a business owner, you’ll be required to adhere to U.S. tax laws. The U.S. tax year runs from January 1st to December 31st, and the filing deadline for this year is April 18th, 2023.

As a U.S. expat, you’ll be eligible for an automatic two-month extension, pushing your deadline to June 15th.

Who Qualifies as a Tax Resident in Saudi Arabia?

Saudi Arabia requires U.S. expats to meet one of two conditions to be considered tax residents. You’ll be classified as a tax resident if you:

• Reside in Saudi Arabia for 183 days or more for the tax year or;
• Have a permanent residence in Saudi Arabia and reside there for 30 days or more during the tax year

As long as you meet one of these requirements, you’ll be able to benefit from Saudi Arabia’s favorable tax laws, including its lack of income tax.

What Types of Taxation Does Saudi Arabia Have?

Saudi Arabia charges several taxes, including a tax on income derived from foreign investments. If you invest in a Saudi project as an expat, you’ll have to pay a 20% tax on income earned on these investments.

This tax doesn’t apply to income derived from trading shares of companies listed on Saudi Arabia’s stock exchange or income earned from savings accounts. 

Additionally, you may have to pay into Saudi Arabia’s social security program. If required to contribute to this program, you’ll be subject to a tax rate of 9% of your gross income. If you’re self-employed, the rate doubles to 18%. 

Does the U.S. Have a Tax Treaty with Saudi Arabia?

No. There is no Saudi Arabia-US tax treaty in place.

Tax treaties are designed to protect U.S. expats from double taxation. Ordinarily, a lack of a tax treaty means you’d be exposed to double taxation. Fortunately, since Saudi Arabia doesn’t charge individuals any income tax, you’ll only have to fulfill your U.S. income tax obligations.

The lack of a tax treaty could be problematic if you’re required to pay business taxes to the Saudi Arabian government, as you wouldn’t be exempt from paying these same taxes to the U.S. government. With that being said, you may be able to take advantage of certain foreign exemptions to reduce your company’s U.S. tax bill.

Does Saudi Arabia Have a Totalization Agreement with the U.S.?

There is no Saudi Arabia-US totalization agreement. A totalization agreement is intended to prevent U.S. expats from paying into two separate social security programs when their host nations require compulsory participation in such a program.

Saudi Arabia does indeed have a social security program in place. This program protects all private-sector Saudi workers and some public-sector employees.

Those required to pay into Saudi Arabia’s social security program must contribute 9% of their gross earnings. Self-employed individuals, meanwhile, have to pay 18% of their gross earnings into the program. 

The good news is you’ll likely be exempt from paying into the U.S. Social Security program, even if you have to pay into the Saudi Arabian program. As such, you should be able to avoid double taxation. 

Even so, it’s essential to consult with a licensed tax professional to verify your exempt status. 

What Tax Forms Do Americans Living in Saudi Arabia Have to File?

You wouldn’t need to file any tax forms with the Saudi Arabian government unless you own or operate a business there. When filing your U.S. income taxes, you’d need to complete Form 1040, a basic IRS filing form used to report your earned income.

You’ll need to complete additional forms if you’re eligible for certain tax credits. For instance, if you’re requesting Foreign Earned Income Exclusion, you must submit Form 2555.

Get Expert Help with Your Expat Tax Return 

With any luck, this definitive guide will help you navigate the complexities of Saudi Arabia taxes for U.S. expats. However, you likely still have questions specific to your unique tax situation. Greenback Expat Tax Services has the answers you’re looking for.