Expat Tax in Saudi Arabia

Saudi Arabia is one of the chief oil producers in the world. While Saudi Arabia has the second-largest proven oil reserves in the world, even this fact fails to capture the whole picture regarding the opportunities presented by the Saudi oil industry. This is because much of the oil in Saudi Arabia is close to the surface and under ample pressure to bring it to the surface easily. This makes productions costs much lower in Saudi Arabia than they are elsewhere in the world. This has created enormous opportunities for expatriates seeking work in the oil extraction industry, commodity trading, and engineering fields related to the processing of petrochemicals.

As of 2008, Saudi Arabia’s workforce was largely foreign-born. Two-thirds of all workers and 90 percent of private sector workers are foreigners. While the Kingdom has made efforts to increase the number of Saudis working in the economy, Saudi Arabia still presents numerous work and investment opportunities for American expatriates.

However, American expatriates living and working in Saudi Arabia still must remain compliant with their numerous tax and foreign account disclosure obligations. The Tax Law Firm of David W. Klasing works with expats in Saudi Arabia and around the world to help them remain compliant with all of their tax obligations. Furthermore, if you fear you have made a minor or serious error, our tax professionals can work to mitigate the potential consequences.

Expat Tax in Saudi Arabia

American Expatriates Must Disclose Foreign Accounts if Their Accounts Exceed Certain Balances

For decades in the post-World War II world, the concept of a secret offshore account represented something of a gray area for American taxpayers. That is, it seemed that everyone was leveraging these accounts and the risk of detection and civil or criminal consequences was extremely low. However, over the course of, roughly, the past decade the old banking regime that accepted or at least turned blind eye to secret offshore accounts was swept away by new U.S. laws that require the disclosure of certain offshore account and assets.

First, a strengthened FBAR reporting obligation that includes penalties for even non-willful violations moved the world towards a system of disclosure. Then, a renewed focus on enforcing both willful and non-willful FBAR violations – the failure to disclose the account or accounts via FinCEN Form 114 when the balance or aggregate foreign balance exceeds $10,000 at any time – further encouraged compliance. A fine of up to $10,000 can, upon conviction, punish a non-willful FBAR violation. Penalties for violations where  there was a voluntary or intentional disregard of the known duty to file FBAR can be punished by a fine of $100,000 or 50 percent of the account balance.

Foreign Account and Tax Compliance Act (FATCA) is sometimes characterized as the United States’ global account disclosure law. The law is characterized as such because it not only requires U.S. taxpayers to disclose foreign accounts and assets when their value is in excess of reporting thresholds, but it also requires foreign financial institutions (FFIs) to provide information about U.S. linked accounts to either their domestic taxing authority or directly to the IRS.

OVDP Can Limit Tax Consequences You Face

If you have failed to make required disclosures under FBAR, FATCA, or both and have yet to receive a letter from the IRS, time is of the essence to mitigate the consequences you could face. This is because the Offshore Voluntary Disclosure Program (OVDP) allows taxpayers to voluntarily disclose their compliance failures in exchange for reduced penalties, but the program is unavailable if you are already under investigation. Taxpayers who come under investigation for undisclosed foreign accounts are likely to face, at least, civil charges. If badges of fraud or other noncompliant tax acts were committed, the likelihood of facing criminal charges is significantly increased.

Concerns about your taxes may make you worry about what will happen when you return to the U.S. or you may avoid coming back to the States. However, you don’t have to live with this ever-present fear and anxiety in your life. Many taxpayers have made errors on their taxes, but those who work proactively to correct them typically face lesser penalties and consequences. If you have offshore tax concerns, it has never been more important to speak with a tax professional. If you are a US expat in Saudi Arabia or throughout the world we invite you to schedule a reduced-rate consultation with the tax professionals of the Tax Law Office of David W. Klasing, call 800-681-1295 or contact us online.