Welcome to the high-level summary of Covid-19 related actions by the Saudi Arabian Government. The details and links below have been split between “Tax Filings Affected”, “Government Employee Wages Benefits Programs” and “Government Loan and Support Programs”; and are simply extracts from the more detailed information available on the websites of the Saudi Arabian Praxity Participant firms’ websites, links to which are available at the bottom of this page. Praxity Participant Firm in Saudi Arabia is Mazars.
Tax Filing Affected
- Since the enactment of the tax reform law in 2017, commonly referred to as the Tax Cuts and Job Act (TCJA), NOLs carried forward are limited to 80% of taxable income for the tax year. The CARES Act suspends this rule until the taxpayer’s first taxable year beginning after 2020 and clarifies that the 80% limitation applies to taxable income computed without regard to deductions for Sections 199A and 250 after taking into account pre-2018 NOL carryovers.
- If deferred, the employer would instead pay 50% of this amount by December 31, 2021, and the remaining 50% by December 31, 2022. The eligible payroll taxes are the employer’s portion of Social Security taxes—6.2% of an employee’s wages. Self-employed taxpayers can also defer the employer’s portion of Social Security taxes in the self-employment tax.
- Eligible employers may claim a credit against Social Security taxes for each qualifying calendar quarter, equal to 50% of qualified wages, and up to $10,000 for all quarters per employee. The maximum credit may be worth up to $5,000 per eligible employee. - Eligible employers operating a business during 2020 must have experienced either:
- A partial or full suspension of the operation of their trade or business during the calendar quarter due to governmental orders that limited commerce, travel, or group meetings due to COVID-19
- A significant decline in gross receipts from 2019 - A significant decline begins with the quarter in which the gross receipts for the quarter were less than 50% of those in the same quarter in the prior calendar year. The decline ends with the quarter in which gross receipts are greater than 80% of the gross receipts for the same quarter in the prior calendar year. - Qualified wages for employers with 100 or fewer employees qualify for the entire credit. For employers with more than 100 employees, the wages eligible for the credit are the wages paid to employees who aren’t providing services due to circumstances described above. - Employers who take advantage of the payroll protection loan—Section 1102 of the act—aren’t eligible. Also, qualified wages don’t include amounts paid for the sick leave credit or The Family and Medical Leave Act (FMLA) credit enacted by HR 6201.
- Section 163(j) interest deduction limitations increased from 30% to 50% of adjusted taxable income for tax years beginning 2019 or 2020. Partnerships, however, remain subject to the 30% limitation for tax years beginning in 2019.
- Federal income tax payments, including payments on self- employment income, have been extended from April 15, 2020 to July 15, 2020. There is no extension request required for the deferral. There is no other extension of payment or deposit for other types of federal tax.
- Recover rebates for qualifying individuals, will receive a tax credit, paid in advance, of up to a $1,200 or $2,400 in the case of married filing-joint taxpayers, plus $500 for each qualifying child, for the 2020 tax year. To receive the full credit, individuals must have an adjusted gross income (AGI) that doesn’t exceed: - $75,000 for single filers - $150,000 for married filing-joint filers - $112,500 for head-of-household filers
- The 10% penalty on early withdrawal of retirement funds won’t apply for any coronavirus-related distributions, up to $100,000, through December 31, 2020, from tax-favored employer-sponsored plans and individual retirement accounts (IRAs)
- Minimum distribution rules are suspended for 2020 for defined contribution plans under Section 403(a) or 403(b), Eligible governmental deferred compensation plans, and IRAS.
- There is an above the line deduction of $300 for charitable contributions in 2020 to qualifying organizations. Also the limit increased from the usual rate of 60% of AGI to 100% of AGI.
- Employers can now make payments toward employee’s qualified educational loans (in addition to the education expenses that were generally allowed), including principal and interest up to $5,250 limit.
Government Employee Wages Benefits Programs
The Government, through Unemployment Insurance (SANED), Bears 60% of The Salaries of Saudi Private Sector labors
- Instead of terminating the contract of the Saudi Labors, an employer is now entitled to apply for the General Organization for Social Insurance (GOSI) and request a monthly compensation payment for his labors of 60% of the wage registered in GOSI for three months, up to a maximum of nine thousand riyals per month, and up to a total value of 9 billion riyals.
- The compensation will cover 100% of Saudis working in establishments with 5 Saudi labors or less and 70% of Saudis working in establishments with more than 5 Saudi labors. According to the royal order, the employer shall be waived from committing to pay the monthly wages for the beneficiaries. The establishment has no right to force the labor to work during the compensation period.
Government Loan and Support Programs
Development Funds Initiatives introduced by Saudi Arabia’s development funds aim to mitigate any financial and economic impacts that the private sector may experience during the COVID-19 pandemic, and will provide the following support:
- Extending the grace period and rescheduling loans for companies struggling with loans and payments amounting to more than SAR 6 billion
- Providing SAR 1 billion worth of direct and indirect loans to finance working capital
- Allocating SAR 4 billion to provide employment support and training programs that will allow more than 300,000 beneficiaries to work in the private sector
- SAR 1 billion going to help private sector employees who have not previously benefited from the support programs available
- Allocation of SAR 4 billion to provide social loans to low-income families during 2020, with 100,000 Saudi citizens set to benefit
- Increasing the direct lending portfolio for micro and small enterprises to SAR 2 billion, set to help 6,000 male and female entrepreneurs
- Allocation of a portfolio worth SAR 2 billion to provide financing support to small- and medium-size health facilities, with 1,000 existing health facilities benefitting from the funds
- Allocation of SAR 2 billion to finance indirect lending programs through financial institutions
Supporting Finance for the Private Sector Program (Saudi Arabian Monetary Authority) SAMA has announced the introduction of Private Sector Financing Support Program with a total value of about SAR 50 billion. The program aims at supporting and enabling the private sector to promote economic growth through a package of measures that includes the following: First: Supporting SME Finance: The purpose of the program is to mitigate the impacts of precautionary coronavirus measures on the SME sector. The program consists of three basic elements as follows:
- Deferred Payments Program: Depositing an amount of about SAR 30 billion for banks and financing companies to delay the payment of the dues of the financial sector (banks and finance companies) from SMEs for a period of six months as of its date.
- Funding for Lending Program: Providing concessional finance of about SAR 13.2 billion for SMEs by granting loans from banks and finance companies to the SME sector to support business continuity and sector growth during the current stage in a way that contributes to supporting economic growth and maintaining employment levels in these enterprises.
- Loan Guarantee Program: Depositing an amount of SAR 6 billion for banks and insurance companies to enable insurance entities (banks and insurance companies) to relieve SMEs from the finance costs of KAFALA Program for the purpose of minimizing finance costs for entities eligible to utilize from those guarantees during the Fiscal Year 2020 and support finance expansion.
Second: Supporting Fees of POS and E-Commerce: This is accomplished via supporting payment fees of all stores and entities in the private sector for a period of 3 months with an amount exceeding in total SAR 800 million. SAMA will pay these fees to payment service providers participating in the national system. Third: As regards institutions affected by the precautionary measures implemented in the cities of Makah and Medina, SAMA is now coordinating with banks and finance companies to facilitate finance repayments of such institutions.
Saudi Central Bank Announces the Extension of the Deffered Payment and Guaranteed Financing Programs The Saudi Central Bank announces the extension of the Deferred Payment Program - one of SAMA's Private Sector Financing Support Program- for three additional months to end on June 30, 2021; to continue enabling the financial sector to support the micro, small and medium-sized enterprises "MSME" sector, which in turn contributes to economic growth and private sector employment. The central bank also announces the extension of the Guaranteed Financing Program for one year to end on March 14, 2022, as another support lever for MSMEs to help overcome challenges that arise from the COVID-19 preventive measures. MSMEs can benefit from the Guaranteed Financing Program through banks and financing companies that are subject to the supervision of the Saudi Central Bank and are members of the Small & Medium Enterprises Loan Guarantee Program "Kafalah".
SMEA/Monshaat The Public Authority for Small and Medium Enterprises (SMEs) has introduced the following support measures:
- Exempting expatriates whose residency ends between the end of March 2020 to the end of June 2020 from the necessary financial requirements needed for visa renewal, by extending their residency period for a period of three months without reapplication
- Enabling employers to recover any work visa fees incurred after the issuance of permits which were not used during the period of the entry and exit ban even if they were stamped at the airport. Alternatively, work visas will be extended for an additional three months without charge
- Enabling employers to extend unused exit and return visas during the period of the entry and exit ban for a period of three months without charge
- Enabling business owners to delay the following, taking into account the commercial activities most affected, by extending the postponement period as needed: Supplying value-added tax, selective goods tax and income tax, Submission of zakat returns and payment of zakat owed, and Implementing procedures to stop services and seizure of funds by the General Authority of Zakat and Income
- Grant zakat certificates without restrictions on the period of approval for the fiscal year 2019
- Expanding the acceptance of installment requests without requiring a down payment by the General Authority of Zakat and Income
- Postponing the collection of customs duties on imports for a period of 30 days, provided that a bank guarantee is presented for the next three months, while introducing the necessary standards to extend the delay period for the most affected activities as needed
- Postponing the payment of some government service fees and municipal fees due on private sector establishments for a period of three months, while introducing the necessary standards to extend the delay period for the most affected activities as needed
- Authorizing the Minister of Finance to approve lending and other forms of financing and exemptions of payment of fees and returns on loans granted until the end of the year 2020 for the Corporate Sustainability Program initiative
Industrial Fund The Industrial Fund has introduced an initiative to support projects in the industrial sector affected by the outbreak, which involves restructuring and postponing loan payment conditions for all small and medical project teams that will settle their installments during 2020. The Fund is also developing the following services:
- Considering postponing and restructuring loan payments for medium and large-size projects which are affected by the precautionary measures taken the Saudi government, and those projects whose installments will be repaid during 2020
- Working on developing a product for its partners, which aims to support the operating expenses of small and medium factories affected by the current economic conditions See government website for additional information on other government initiatives.
Links to Our Member Firms
Further Covid-19 advice
The information contained herein on Covid-19 government measures within the G8, consists solely of information that can be found on the websites of one or more Praxity Participant firms, and has not been written, modified or verified by Praxity, it’s staff, officers or directors.