Saudi Arabia: Tax implications of global mobility in KSA

To increase the efficiency of the organisation’s workforce, many companies have started to implement their global mobility strategies to empower flexibility and to adapt to hybrid and remote working methods.

As a result of the pandemic “since 2020”, most of us have become familiar with global mobility, since (in a simple form) the employee can “work from anywhere” as per flexible and remote agreements signed between the employer and the employee who performs overseas duties virtually.

Regarding the complexity of the global mobility process, since it requires learning various tax and employment laws in different markets, this may trigger potential multi-jurisdiction tax compliance.

As a result, the tax authority in KSA (ZATCA) –as it appeared during the latest per­formed audits –adopted a new approach involving the scrutinisation and tracking of cross-border relationships between the employer and the employee that may trigger tax consequences.

Accordingly, the authorities are starting to increase recovery and collection activities for tax obligations arising from remote working.

ZATCA is focusing on intercompany transactions, including cost sharing and recharges related to the global mobility workforce. ZATCA may require transfer pricing studies to comply with the arm’s-length principle.

Non-compliance with the TP requirements may result in additional tax levied on the part of the employer as well as such transactions being subject to withholding tax in some cases.

Moreover, the direct cross-border hiring of employees may trigger a taxable presence (permanent establishment) in the country of employment.

Finally, companies should adapt so as to manage these kind of transactions by under­standing the employment and tax law of different companies and income tax treaties between countries to avoid any unintended tax consequences.

Read the WTS Global Mobility Newsletter here.