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

As a US expat in Saudi Arabia, being self-employed means you must pay a 15.3% self-employment tax on your net income due to the lack of a totalization agreement between the US and Saudi Arabia.

How are federal taxes different from self-employment tax?

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

Does my business structure affect my taxes?

Yes, it does. As a sole proprietor, you pay self-employment tax. If you set up a corporation or LLC, you might draw a salary, which can alter your tax liabilities and potentially reduce self-employment tax.

Should I reconsider self-employment in Saudi Arabia?

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

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