Americans who relocate to Riyadh, Jeddah, or the Eastern Province for an oil and gas assignment, a corporate transfer, or an entrepreneurial move often assume that living in a country with no income tax means leaving the tax filing problem behind entirely. That assumption is only half right. Saudi Arabia imposes no personal income tax on the salaries or wages of individuals, so there is no local income tax return most residents ever file with the Zakat, Tax and Customs Authority (ZATCA). The United States, however, still taxes its citizens and green card holders on worldwide income no matter where they live, so a US person in Saudi Arabia keeps filing a Form 1040 every year even though the country they live in never asks for one. The planning question is no longer which government's bill is bigger, it is how to use the US-side tools correctly, since Saudi Arabia has no local tax bill to hand over and credit against.
Do US Citizens Living in Saudi Arabia Have to File a US Tax Return Even Though There Is No Saudi Income Tax?
Yes, every year, even though there is generally no equivalent obligation on the Saudi side. Saudi Arabia does not impose a personal income tax on salaries, wages, or most individual income, so most US citizens and green card holders working in Riyadh, Jeddah, or elsewhere in the Kingdom never file a personal income tax return with ZATCA at all. That absence does not touch the US side: the United States taxes citizens and green card holders on worldwide income no matter where they live, a rule tied to citizenship rather than residency, so a Form 1040 is due to the IRS every year regardless of how Saudi Arabia treats that same income.
ZATCA is a real tax authority, just not one most individual expats deal with directly. Formed in 2021 through a merger of the Kingdom's former zakat and tax authority with Saudi Customs, ZATCA administers value-added tax, zakat on the Saudi and GCC-owned share of a business, and corporate income tax on the non-Saudi, non-GCC share, all more relevant to a business owner than to a salaried employee. For a US employee, ZATCA has essentially nothing to collect, which is what makes the US filing obligation the whole story here.
How Does Saudi Arabia Tax Residents on Income?
It largely does not, and that single fact shapes every other answer in this guide. There is no Saudi equivalent of a Form 1040, no personal tax brackets, and no local income tax withheld from a paycheck, regardless of how long you have lived or worked in the Kingdom.
The business-side taxes mentioned above sit alongside this, not in place of it, and apply to ownership and activity rather than personal salary: zakat applies to the Saudi or GCC-owned share of a business, corporate income tax applies to the non-Saudi, non-GCC share, and a value-added tax applies on top of both to transactions generally. For a US employee drawing a wage, the practical result stays the same: nothing is withheld and nothing is owed locally, which is precisely why the US return becomes the only income tax return a Saudi-based American actually files most years.
Should You Claim the FEIE or the Foreign Tax Credit on Saudi Arabia Income?
For nearly every American earning a salary in Saudi Arabia, the Foreign Earned Income Exclusion on Form 2555 is the tool that actually reduces US tax, because the Foreign Tax Credit on Form 1116 depends on foreign income tax being paid, and Saudi Arabia generally has none to point to on personal employment income. Under IRC Section 911, a taxpayer who passes the physical presence test or the bona fide residence test can exclude foreign earned income up to an annually indexed maximum, $130,000 for 2025, from US taxable income before the calculation begins. Pairing it with the foreign housing exclusion or deduction, also under Section 911, can shelter a meaningful slice of Saudi housing costs, which matters given how much of a typical expatriate package in the Kingdom runs through a housing allowance.
The Foreign Tax Credit, computed under IRC Sections 901 and 904 on Form 1116, credits foreign income tax paid against US tax on the same income, dollar for dollar within each category. In a higher-tax country that credit routinely erases the US tax bill and leaves a carryover; in Saudi Arabia there is typically little or nothing to credit, so claiming it instead of the FEIE usually leaves US tax still due. The consequence cuts the other way once income exceeds the FEIE cap: with no foreign tax to credit, the excess, self-employment earnings, and investment income generally remain fully taxable, making proactive planning, timing income, retirement contributions, and the housing exclusion, more valuable here than in a treaty, higher-tax jurisdiction. Our FEIE versus Foreign Tax Credit comparison covers the mechanics in more detail.
Is There a US-Saudi Arabia Tax Treaty That Prevents Double Taxation?
No. The United States and Saudi Arabia do not have a comprehensive income tax treaty in force, unlike the network the US maintains with dozens of other countries. For most Americans on a Saudi salary this matters less than it would elsewhere, since there is little Saudi income tax in the first place for a treaty to coordinate.
Where it is felt is in the details a treaty would otherwise resolve: no tie-breaker for dual residency, no reduced withholding on cross-border investment income, no competent-authority process for a dispute, and, as covered below, no treaty-based deferral for Saudi retirement-type benefits. Every question here is answered from US domestic law alone, IRC Section 911 and Sections 901 and 904 among them, rather than layered against treaty text. Confirm current status against the IRS treaty list, since it can change.
Does a US-Saudi Arabia Totalization Agreement Cover Social Security?
No. There is no totalization agreement between the United States and Saudi Arabia, unlike the roughly 30 countries, including the UK, Canada, Germany, and Australia, where such agreements coordinate Social Security coverage and prevent a worker from paying into two systems on the same earnings. This gap is less costly than elsewhere, because GOSI, Saudi Arabia's social insurance system, generally provides pension-type coverage to Saudi and GCC nationals, not the broader foreign workforce, so there is typically no competing Saudi retirement contribution to coordinate against in the first place.
Self-employed Americans face a narrower problem. The FEIE excludes foreign earned income from US income tax, but not from the self-employment tax base under IRC Section 1401, so a self-employed US person in Saudi Arabia still owes full US self-employment tax on net earnings, and without an agreement there is no certificate of coverage process to change that. Our guide to totalization agreements and self-employment tax abroad explains how the certificate process works where an agreement exists, and why self-employed Americans in Saudi Arabia need to budget for self-employment tax as a fixed cost.
How Are Saudi Arabia Retirement Benefits and End-of-Service Awards Taxed by the US?
Generally, not automatically, and the absence of a tax treaty makes Saudi Arabia a stricter case than most. Saudi labor law requires employers to pay departing employees, including most foreign workers, an end-of-service award, a lump sum tied to tenure and final salary, rather than enrolling them in a 401(k)-style pension plan. GOSI, the Kingdom's social insurance system, layers pension-type contributions on top of that for Saudi and GCC nationals, but foreign employees are typically covered only under GOSI's narrower occupational-hazards branch rather than a retirement account.
The general US rule, under IRC Sections 401(a) and 402(b), is that income accruing inside a foreign employer-sponsored plan is taxed currently to a US person unless a specific treaty provision defers it. Because there is no US-Saudi Arabia income tax treaty, that deferral is never available here, a more restrictive result than an American would face in a treaty country. An end-of-service award is generally treated as compensation once earned and payable, and growth inside any employer savings scheme can be taxed as it accrues rather than when distributed. Our foreign pension US tax treatment guide walks through the four questions that determine the answer for any foreign plan, and here the treaty-deferral question is settled by the absence of a treaty rather than by reading treaty text.
Are Saudi Arabia Investment Funds Taxed as PFICs?
Usually, yes, once a Saudi-based US person invests through anything other than a US brokerage. A mutual fund, ETF, or pooled investment product offered through a Saudi bank or a regional wealth management platform typically meets the definition of a passive foreign investment company under IRC Section 1297, with Sections 1291 and 1298 governing the tax treatment, regardless of how that product is taxed under Saudi rules, which in most cases means not taxed locally at all.
Once a fund is a PFIC, the default US tax treatment is punitive absent a timely election: gains and certain distributions are spread over the holding period, taxed at the highest rate for each year, and hit with an interest charge on top. Each PFIC generally requires its own Form 8621 filing, due even in a year no tax is owed. This is a common, expensive trap among Americans in Saudi Arabia, often built into locally distributed investment funds marketed without any mention of how the product is treated back home; a US-domiciled brokerage account generally avoids the issue for new investing.
What Else Do You Have to Report to the IRS?
Beyond the Form 1040 itself, Saudi financial accounts and investments carry their own information-reporting obligations, and a zero-income-tax environment does nothing to reduce them. These filings are enforced on their own terms, and the penalties for missing them are typically far larger than any tax that would have been due.
The Saudi Arabia Reporting Stack
Reference- FBAR (FinCEN Form 114). Required when the combined balance of your Saudi bank, brokerage, and savings accounts exceeds $10,000 at any point during the year. See our FBAR filing guide.
- Form 8938 (FATCA, IRC §6038D). A separate filing threshold, higher for Americans living abroad, that can require you to list the same Saudi accounts directly on your federal tax return. See our Form 8938 guide.
- Form 8621 (PFIC). Generally required for each Saudi-offered or regionally distributed pooled fund that qualifies as a passive foreign investment company. See our PFIC and Form 8621 guide.
Whether you even count as a US tax resident, if your situation is more complicated than straightforward citizenship, such as a long assignment on a work visa before a move became permanent, is a separate question governed by the substantial presence test.
Bottom Line
Living in Saudi Arabia does not simplify your US tax picture the way the absence of a local income tax might suggest, it just removes one side of the equation most expats elsewhere have to manage. ZATCA has no personal income tax return to collect, but the IRS still requires a Form 1040 every year, and with no Saudi income tax to credit, the FEIE, paired with the housing exclusion, does the real work here rather than the Foreign Tax Credit. There is no treaty and no totalization agreement to lean on, so income above the FEIE cap and self-employment earnings generally stay fully exposed to US tax, and end-of-service awards, regionally distributed funds, and foreign accounts each carry their own reporting rules regardless of how little tax Saudi Arabia ever asks for.
Have questions about US expat taxes in Saudi Arabia? Contact TS CPA for a free consultation. We respond within the same day.
Official IRS and Government Sources
- IRS, Foreign Earned Income Exclusion
- IRS, Foreign Tax Credit
- IRS, US Citizens and Resident Aliens Abroad
- IRS, United States Income Tax Treaties A to Z
- Social Security Administration, Totalization Agreements
- FinCEN, Report of Foreign Bank and Financial Accounts (FBAR)
- IRS, About Form 8621
- IRC Section 911, Citizens or Residents Living Abroad