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What should you know about self-employment income in Saudi Arabia?

As a US expat in Saudi Arabia, being self-employed comes with specific tax obligations. You are required to pay a 15.3% self-employment tax on your net income due to the absence of a totalization agreement between the US and Saudi Arabia.

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How do federal taxes differ from self-employment tax?

Federal income tax and self-employment tax are distinct in several ways:

  • Federal Income Tax: This tax varies based on your income level and filing status, with brackets ranging from 10% to 37% for 2024.
  • Self-Employment Tax: This is a flat 15.3% tax on your net self-employment income, covering 12.4% for Social Security and 2.9% for Medicare.

Does your business structure affect your taxes?

Yes, the structure of your business can significantly impact your tax liabilities:

  • Sole Proprietor: You will pay the self-employment tax on your net income.
  • Corporation or LLC: You might be able to draw a salary, which can change your tax liabilities and potentially reduce your self-employment tax.

Should you reconsider self-employment in Saudi Arabia?

Given the 15.3% self-employment tax, it might be worth reconsidering self-employment in Saudi Arabia. With proper planning and advice from a tax professional, you can effectively manage or minimize your tax obligations.

Why partner with a specialist Expat accountant?

Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.


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