Kuwait Committee approves remittance tax on Expat – Is Saudi Arabia next?

The preliminary committee in Kuwait recently announced the approval of a draft law of foreign remittance tax on its expats for sending money out of the country.

This is indeed a bad news for all the expat workers because expat usually travel to foreign countries far away from their homeland to earn some pennies to support their families in the third world countries and it is compulsory for them to send money back to their families.

However, this news has worried all the expats of Kuwait. Although MPs announced that this step of applying remittance tax on Expat will encourage them to spend their money in the country.

On the other side, the committee approved this foreign remittance tax by ignoring the warning of the central bank of Kuwait.

According to a report, it was stated that there are almost 70% expats working in Kuwait who make about 4.5 million populations and in the last five years, they sent nearly 19 billion Kuwait dinars ($63 billion) out of the country to different countries.

The financial and economic affairs committee voted 4 to 1 in favors of the draft law which is said to be applied on regular basis after its approval by the wider National Assembly and accepted by the Government.

It was also announced that this draft law is applicable for expats only and not on the citizen of Kuwait. This bill defines all the expats in the country will be applied tax on sending the money out of the country instead of the normal commission and charges by banks and exchange houses.

This bill also mentioned that the transactions related to investment protection would not be applied taxes.  

The draft law stated, on transferring up to 99 Kuwait dinar, 1% of tax will be applied and on the transfer of 100 to 299 Kuwait dinars it will be taxed 2% and the transfer from 300 to 499 Kuwait dinars the tax will increase to 3% and the transfer of 500 Kuwait dinars or above this amount will be taxed at the rate of 5%.

All these taxes would be collected by the Central bank and then it will be paid to the finance ministry.  The committee further said those who violate the law by getting involved in Hawala System, Hundi or money laundering will have to face heavy fines.

Furthermore, the expats living in the Kingdom are worried about the application of the remittance tax on the expats of the Kingdom. They have a question, Is Saudi Arabia next to apply remittance tax on its expats?

If you remember, in April 2016 the foreign committee of the Shoura Council proposed 6% tax on foreign remittance. The matter went into a debate at different levels in the government as well as public circles.

After a careful consideration, the government decided not to impose any tax on foreign remittance. At that time, Saudi Arabia was the first country in the Gulf to talk about this kind of tax.

However, once the precedent is set by the Kuwait government, we are not sure about the outcome of the case.

Source: Gulf News