Today will likely be a busy day for the United States Postal Services as many individuals scurry to get their taxes sent to the Internal Revenue Service (IRS) before midnight. Yes, April 15th is the deadline for U.S. taxpayers to send in their taxes. However, except for the American expats who are in Saudi Arabia but still bound by U.S. law to include filing income tax returns, it will be just another typical day in the Kingdom. Citizens of Saudi Arabia do not have to worry or fear or wonder about filing out those myriad of tax forms for there is no such thing as income taxes in the Kingdom.
As further explained in this link individuals are only taxed on their business income in Saudi Arabia but even then there are distinctions. Non-Saudi and non-GCC citizens are taxed on their Saudi sourced income. However for Saudi nationals and GCC nationals, instead of taxing there is zakat. Zakat is an Islamic direct tax on property and income. Zakat is payable by citizens of the Gulf Cooperation Council (GCC) in lieu of the income tax. It is levied on the taxpayer’s total capital resources and income that are not invested in real estate.Zakat is levied at a flat rate of 2.5% on the estimated net profit of 15% the gross income.
Filed under: America, Saudi Arabia, Saudi Living Tagged: | America, customs, KSA, Saudi, Saudi Arabia, travel
And even the Americans living in Saudi probably fall under the extended deadline for overseas Americans, sometime in June, I think.
Long rants are usually considered unethical in other people’s blogs. Your blog is your place to speak, not mine. So before saying anything else, I apologize for this mouthful one. I found it really hard to have it all said in just one breath. For what it’s worth, it’s your fault. So there.
Based on the site which you’ve referred to, per capita income in Saudi Arabia is $15,417 (2007 est.).
Saudi Arabian Population is 28146656.
Let’s assume again that only 10% percent of the Saudi citizens make that kind of money, give or take, based on the assumption that on 10% of the world’s minority controls 90% of the world’s money.
And let’s leave out women, non-citizens, children, illegal aliens and the elderly. I say, let’s just calculate the zakat taken from just two million of the Saudi population, including the royal family, the private banking clientele, the able and secure.
Let’s just assume that Saudi Arabian per capita is based on only 2 million of its richest populations.
If (2.5%) of $15,417 equals $385.43, and let’s round up that number to just $300
$300 X 2.000.000 (10% of the rich population) = $600 million dollars.
With your post about the poor in Saudi Arabia in mind, I have 3 things that I’d like to know:
1. Where does $600 million dollars go to every year? How is it spent? To whom? On what?
2. Does that particular 10% of the population even know about the zakat? Because if they are paying it, there should never be any poor residents left in Saudi, citizens or not.
3. Comparing three hundred dollars to 15 thousand is like comparing a $100 to dimes and nickels. Why is it so hard to pay up?
This article is in Arabic, but it sums up my suspicion that Saudis and GCC residents don’t pay the zakat. The first paragraph translates: “If the traders in Saudi and the GCC paid their zakat, you’ll never see a poor, or needy, or indebted in the entire Muslim population.”
I totally understand zakat and the reasons for it…but my question is, does anyone check to ensure that is paid or is it rather up to the individual…?
notfromaroundhere: Overseas Americans are also required to pay their taxes on 15 April unless they file for an extension.
Hning – excellent excellent points and I wish we did have those answers to your questions.
Ines – I’m wondering if the zakat is viewed as a matter between the individual and God? It does not seem to me that there are no measures in force to ensure it is paid.
What you all should think about is the fact that since citizens in Saudi do not pay tax this means that the government and the people who lead them do not need their money and do not operate under the same level of accountability as other governments do.
Think about it. In most other countries in the world the citizens can rightly say to their government “your salaries are paid by us, the people. You are accountable to us the people for what you do with our money”.
Because no taxes are paid in Saudi and because the country is operated by, and for, the exclusive benefit of the members of the Saudi royal family, it means that ANYTHING provided to the Saudi people is done at the good will of the royal family.
Because the people do not fund the government they have little or no real say in what happens. If the Saudis were the pay income tax they’d be in a much better position to exercise control over how the money is spent.
The revenue of the state, namely oil, needs to be owned by the people, not by a single family. Tax should b paid so the government feel that they owe the people, not the other way around.
How interesting! No kidding, I was wondering about income taxes in other countries just last night. Very nice of you to answer my question re: KSA! Thanks!
I just find this whole tax-free middle east thing a little vague for Americans.. who have to pay income taxes no matter what.
Sure you can get away from it by satisfying some criteria , but you can easily not satisfy and end up paying taxes
Even if the resources of Saudi Arabia aren’t owned by the people directly, the state should be divorced from the royal family. In Western Europe it took a lot of strife before the absolute monarchs became constitional monarchs. Saudi Arabia in political terms is a new country and I don’t see this happening any time soon.
Same thing happening in Bahrain….its run on behalf on the royal family…which means the people by and large gotta suck it up…it being anything they dont particularly like.
Considering dictatorships are haram in Islam…Im wondering how the muttawa allow such a state of royalty to exist…it goes against everything the Prophet taught. Perchance there are certain monies changing hands…in which case…hmmmm?
haha – i actually am knee deep in tax documents as we speak, and am taking a much needed break!
I thought that Zakat was supposed to be a religious tithe. If so, why does it go to the government? And, do they have specific restrictions on what it can be used for?
Also, many Americans pay tithes and/or zakat to their places of worship in addition to the income tax. What do Saudi readers think of that? Over kill or good?
I suspected the slow response rate on this topic had to do with tax deadlines!
Zakat seems very reasonable compared to the tithe (originally 1/10th of gross income from all sources) to the Church (whichever one) independent of the state ie on top of feudal tributes.
In Europe absolute monarchs became constitutional monarchs because they were so indebted to the nobility they had to relinquish powers to the noblemen (the Magna Carta, for example).
One conversation among immigrants in Canada about taxes (high compared to the US) lead to the observation that at least in Canada the money is used for services available to all, unlike in some countries where the taxes seem to just disappear into state/ personal coffers.
For those on a tax DEADline (!) break
:
“Things as certain as death and taxes, can be more firmly believed.”– Daniel Defoe
“‘In this world nothing can be said to be certain, except death and taxes.”– Benjamin Franklin
“Death, taxes and childbirth! There’s never any convenient time for any of them.”– Margaret Mitchell
im no an expert but im gonna try to answer what i know!
Hning
1. Where does $600 million dollars go to every year? How is it spent? To whom? On what?
it is supposed to go to the poor people! but as some put it not evrey one pays their zakat! and alot of money goes to other poor people in other poor countires as well! to bulid schools or masajd or what so ever
but im pretty sure thats not only where it goes to!
2. Does that particular 10% of the population even know about the zakat? Because if they are paying it, there should never be any poor residents left in Saudi, citizens or not.
Every one knows about it but not everyone pays it! even though in Islam they should! and i gree with you that if they do no poor people will be found!
3. Comparing three hundred dollars to 15 thousand is like comparing a $100 to dimes and nickels. Why is it so hard to pay up?
where i come from most of people do pay it up! you can pay it anytime or on specific time of the year but however the majority do every year!
as for those who dont pay i think they just dont want to! Parsimonious who do not want to spend their money unless it was for their own benifit! or they just dont care!
Abu Sinan i totally agree with you 100%!
tanyag
I thought that Zakat was supposed to be a religious tithe. If so, why does it go to the government? And, do they have specific restrictions on what it can be used for?
it is and its actually haram not pay up! the goverment controls it thats why it decides where it goes to! however there are other organizations that only takes care of the zakat matter! and they’re not all run by the goverment.. we have tons in my hometown that are just specialized in the poor people of each area!
that doesnt prove that poor people dont exist but they do get help but not all of them!
Also, many Americans pay tithes and/or zakat to their places of worship in addition to the income tax. What do Saudi readers think of that? Over kill or good?
im sorry i didnt get that part! you mean they pay it Makka and Madina? or other holy places?
SomeOne – thank you very much for explaining zakat and expectations!
“Internal Revenue Service”? This is what my American friend had to say about it in his blog:
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Dear Internal Revenue Service,
You are not a “service”. You never have been, you never will be. The only people you service are yourselves, to the point that even the entire rest of the government hates you. Change your name back to the Bureau of Internal Revenue because then you at least won’t be liars on top of thieves.
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@Hnning:
The world spends billions and billions of dollars in aid to countries in Africa and around the world but there are still poor people.
Aid in and out of itself can’t make people “unpoor” so to speak.
Thanks Mohamad – and you know as I dwell on it, it would be more palatable if the IRS did revert back to being the Bureau of Internal Revenue. I’d not thought about it but do agree, the word “Service” is indeed misleading.
Here’s an interesting adjunct to this topic – all those Saudis who have both a Saudi and US passport – and there are a lot of these Jus Soli citisens around – are legally bound to file and pay US taxes each April 15th as well.
They’re classified as non-resident citizens, and as US citizens, should by law be taxed on their income, no matter where that income is generated.
Of course, despite the fact that many take advantage of the benefits of their US citizenship and passports, few ever fulfill the other part of the US citizenship equation – taxes.
that is indeed an interesting adjunct to the topic. Citizenship does have its price!
Mohamed S–excellent points. The problem of poverty exists in relatively high tax, high social services countries, as well as in the places where it is endemic.
Sand Gets in My Eyes–perhaps one of the most galling benefits is differential fees for foreign and national students at public universities, since taxes usually makes up part of the difference, and another is national scholarship eligibility,
I havent a clue about taxes….how does the US govt know that you are working or have worked etc in another country in order to be obliged to file taxes on that revenue?
@coolred-
Well, for once if its an American company or one that does business in the U.S. , they are required to report to the IRS/American govt, wages paid to the American employees.
The other thing is the ‘honesty’ factor, because if the IRS finds out that you didn’t report foreign earned income they WILL penalize you in interest and penalties and unpaid tax. IRS has far reaching hands and sooner or later they end up getting you – or your estate.
@ Sand Gets in My Eyes
i read ur article and its very interseting! i didnt know so many restrictions applies to Americans born outside of US.
im one of those who have both american and saudi passports and its true we dont pay taxes and we get to vote and do everything else US citizens do!
btw u get a saudi passport by marriage right? do they still let u keep ur american one? cuz my unckle’s wife had to give up hers but she got it back after the divorce!
[...] Tax Time – But Not in Saudi…….yet AmericanBedu clarifies something that may have been unclear in my discussion of income taxes in Saudi Arabia: …individuals are only taxed on their business income in Saudi Arabia but even then there are distinctions. Non-Saudi and non-GCC citizens are taxed on their Saudi sourced income. via Tax Time – But Not in Saudi « American Bedu. [...]