How does Saudi Arabia payroll tax work in 2026?

How the GOSI new system works

GOSI introduced a new contribution system for Saudi nationals who joined from 3 July 2024. The rates follow an annual uplift schedule, rising by 0.5 percentage points each July. The employer rate for new-system employees was 12.25% from January 2026 and moves to 12.75% from 1 July 2026. Existing-system employees (those registered before July 2024) remain on the flat 11.75% rate with no uplift.

What the GOSI employer rate covers

For Saudi nationals under the existing system, the 11.75% breaks down as: 9% retirement pension, 2% occupational hazards, and 0.75% SANED unemployment insurance. For expatriate employees, only the 2% occupational hazard component applies. There is no pension or unemployment coverage for expatriates under GOSI.

The contributory wage cap

GOSI contributions are calculated on the contributory wage, not total remuneration. The contributory wage is basic salary plus housing allowance only. Other allowances (transport, bonuses, overtime) are excluded. The cap is SAR 45,000/month. A senior hire earning above that amount in total compensation still has GOSI calculated on a maximum of SAR 45,000/month.

Note on the new-system employee rate: the cache holds the new-system employer rates as verified figures. The new-system employee rate for H1 2026 is 10.25% per Mercans (rising to 10.75% from July 2026), but this specific key is not in the cache as a verified figure and the 10.25% is stated in prose only. The existing-system rate of 9.75% is cache-verified.

Because Saudi Arabia levies no personal income tax, the take-home calculation is straightforward. A Saudi national employee on the existing system has 9.75% deducted for GOSI. That is the only mandatory payroll deduction. An expatriate employee has no mandatory deduction at all and takes home their full gross contractual salary.

This is one of the defining features of hiring in Saudi Arabia. There are no income tax brackets, no personal allowance calculations, no year-end tax reconciliation filings, and no tax code system to maintain. Payroll systems do not need a tax engine for the income tax calculation. The only mandatory deduction is GOSI (for Saudi nationals).

What does apply

The absence of personal income tax does not mean a zero-tax operating environment. Employers are responsible for:

• GOSI contributions (see sections above): mandatory for all employees registered with GOSI, at the rates described
• Wage Protection System (WPS) compliance: all payroll must be processed through the WPS and wages paid on time; late wages generate Ministry of Human Resources and Social Development (MHRSD) violations
• Zakat: if the employing entity is Saudi or GCC-owned, Zakat applies at the company level, not as a payroll deduction
• Value Added Tax (VAT) at 15% applies to goods and services but not to employment salaries

The Wage Protection System is Saudi Arabia's mandatory payroll compliance infrastructure. Every employer must register with WPS and route all payroll payments through a WPS-linked bank account. The system records the amount, timing, and recipient of every wage payment. The Ministry of Human Resources and Social Development reviews WPS data and flags employers who pay late or below the contractual amount.

Consequences of WPS non-compliance include:

• Suspension of the employer's ability to issue new work visas (Iqama) for expatriate employees
• Restrictions on registering new employees on the Qiwa platform
• Potential escalation to Ministry inspection and fines

GOSI filing and payment

GOSI contributions are due monthly. The employer reports the contributory wage for each Saudi national employee and pays the combined employer and employee share to GOSI. The employer deducts the employee portion at source. Expatriate employees are not reported through GOSI payroll (only the 2% occupational hazard contribution is required for them).

Qiwa and Nitaqat

Qiwa is the digital platform for employment contracts and labour compliance in Saudi Arabia. All employment contracts must be registered on Qiwa. The Nitaqat Saudization programme sets minimum quotas for Saudi nationals in each business sector. The applicable quota depends on the employer's sector classification and total employee headcount. Employers who fall below their Nitaqat quota face restrictions on renewing expatriate work permits.

1. Confirm employee type and GOSI system

   Identify whether each employee is a Saudi national or expatriate, and whether Saudi nationals registered before or after 3 July 2024. This determines the applicable GOSI rate.

2. Calculate gross contributory wage

   Add basic salary and housing allowance only. Exclude transport, bonuses, and other allowances. Apply the monthly cap on the contributory wage.

3. Deduct employee GOSI and calculate employer GOSI

   Deduct the employee GOSI contribution from the Saudi national employee's gross pay at source. Calculate the employer GOSI at the applicable rate for each employee type.

4. Pay wages through the Wage Protection System

   Transfer net pay via a WPS-linked bank account before or on the agreed payday. The WPS records the transfer in real time and flags late payments to the Ministry.

5. Submit and pay GOSI contributions

   File the monthly GOSI contribution report and pay the combined employer and employee GOSI share to the General Organization for Social Insurance by the monthly deadline.

The GOSI retirement component covers Saudi national employees from their first day of employment. The 9% employer retirement contribution and 9% employee retirement contribution are included in the GOSI rates already described. There is no additional mandatory pension contribution layered on top of GOSI.

End of Service Gratuity (EOSG)

In addition to GOSI, Saudi Labor Law (Article 84) requires employers to pay an End of Service Gratuity when an employee leaves, provided they have completed at least one year of service (for employer-initiated termination). The EOSG is calculated separately from GOSI and is not part of the monthly payroll obligation. It is a lump-sum entitlement that accrues throughout employment and becomes payable on exit. The EOSG accrual is based on the employee's last wage and the length of completed service.

Saned unemployment insurance

The SANED unemployment insurance fund is the 0.75% component within the GOSI employer and employee rates. It provides a short-term income-replacement benefit to Saudi nationals who lose their jobs through no fault of their own. It is funded through GOSI contributions and requires no separate employer registration or filing.

Minimum wage for Saudi nationals

The law sets a minimum monthly wage of SAR 4,000/month for Saudi nationals in the private sector. There is no minimum wage for expatriate workers. The minimum wage forms part of the contributory wage base for GOSI and must be paid through WPS.

Real HR and legal experts manage your Saudi payroll from day one. An actual person handles GOSI registration, monthly GOSI submission, WPS payroll processing, Nitaqat quota monitoring, and EOSG calculation on exit. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice.

The GOSI two-system complexity (existing vs new, H1 vs H2 rates) is something your payroll needs to get right from the first run. Getting it wrong means an underpayment to GOSI and a correction cycle. Teamed's team knows which system applies to each employee and runs both rate schedules without you needing to track them.

An EOR hire in Saudi Arabia can graduate to your own Saudi entity when the headcount justifies it. That path is open from day one, until it isn't the right move. Run the Employer Cost Calculator to see your full Saudi Arabia cost at the relevant GOSI rate for the employee type. Start from the Saudi Arabia hiring overview.

Key sources: PwC Tax Summaries Saudi Arabia, Mercans GOSI Rates 2026, and Addleshaw Goddard 2025 KSA Labour Law Amendments.