Tax Return for Employees with Dual Income: How to Organise Your Salary with Freelance Work Without Mistakes

When an employee in Saudi Arabia adds a freelance activity to their basic salary, they face a simple question: Do I need to submit a tax return? The answer is yes, especially if you are not Saudi or if your freelance income exceeds the exemption threshold. This article explains step by step how to gather your data, calculate tax, and file the return without complications.

1. Why the return matters even if the salary is fixed

The monthly salary in most companies has only social security deductions (if you are Saudi) or insurance contributions for expatriates. Income tax, however, is not imposed on Saudi individuals in Saudi Arabia, but non-Saudi expatriates are subject to the income tax system if they exceed the annual exemption threshold (around 140,000 SAR). If you have freelance income – for example, graphic design or consultancy – this income is added to your total and affects tax calculation.

2. Gathering documents before working on the return

Start with clear documents. For each income source you need:

– Salary: Monthly payslip or receipt showing net salary and entitlements.

– Freelance income: Invoices or receipts issued to the client, or reports from a freelance platform (such as Malt or Upwork) showing amounts paid to you.

– Rent or investment: If you have a rented property or shares earning dividends, gather lease contracts and profit statements.

Also bear in mind any allowable deductions: health insurance, exempt donations, or business expenses (such as buying software or tools for freelance work).

3. Calculating taxable income

Assume you are not Saudi and have the following data for the financial year (from 1/1 to 31/12):

• Monthly salary 10,000 SAR → 120,000 SAR annually.

• Freelance income 30,000 SAR (after deducting work expenses of 5,000 SAR).

• Residential apartment rent 20,000 SAR (exempt from tax if residential, but we mention it to complete the picture).

Taxable income is calculated by adding salary to freelance income, then deducting what you are entitled to deduct. In our example:

120,000 + 30,000 = 150,000 SAR total taxable income.

If you are not Saudi, the annual exemption threshold is approximately 140,000 SAR. The difference is 10,000 SAR, and this is the amount to which income tax applies.

4. Knowing the tax rate and applying it

The tax system for non-Saudi individuals uses progressive brackets. For example:

• From 0 to 140,000 SAR: 0%.
• From 140,001 to 300,000 SAR: 20%.

In our example, 10,000 SAR falls in the first bracket of the 20% rate, so the tax due is 2,000 SAR.

5. Value Added Tax (VAT) on services you provide

Your freelance services, if subject to VAT, require you to calculate tax on each invoice. The VAT rate in Saudi Arabia is fixed at 15%. For example, if you provide a consultancy for 5,000 SAR net, the invoice is:

Amount before tax: 5,000 SAR
VAT (15%): 750 SAR
Total: 5,750 SAR.

The VAT you collect from clients must be recorded in the Zakat and Tax Authority system, and submitted in the VAT return (Form 305) every three months.

6. Steps to submit the employee tax return

1. Access the “National Tax Platform”: Register your account using your national ID or residence permit.

2. Choose “Individual Income Tax Return”. The system will pre-fill some fields automatically based on your previous data.

3. Enter salary details – usually filled by your employer via the “Payroll Disclosure” system. If not available, enter the amount manually.

4. Add freelance income. Use the table provided on the website to record invoices, expenses, and VAT collected.

5. Calculate tax according to the brackets, or select the “Automatic Calculation” option if available.

6. Review the return, ensure there are no spelling or numerical errors, then press “Submit”.

7. After submission, you will receive a notification of the amount due or any surplus. If you owe 2,000 SAR, pay it via bank or the “Payment” platform within 30 days of the notification to avoid penalties.

7. Avoiding common mistakes

• Overlooking freelance income: Many employees forget to record small invoices, causing discrepancies in the return and leading to penalties.

• Confusing VAT with income tax: VAT is not deducted from income tax; each has its own form and submission dates.

• Not keeping documents: Retain copies of all invoices and tax-related documents for five years, as reviews may request them.

8. Practical tip from my experience

Before tax return season arrives, set aside a week in your schedule to gather all documents. Use a simple Excel sheet: a column for salary, a column for freelance income, a column for deductible expenses, and a column for VAT. This method lets you see the full picture and reduces error chances.

9. Conclusion

The tax return for an employee with dual income need not be complicated if you follow organised steps. Start by gathering documents, calculate taxable income, apply the brackets, do not forget VAT on your services, and submit the return via the national platform before the deadline. With these simple steps, you ensure compliance and avoid unwanted penalties.