YemenTax Obligations Detailed

In Yemen, employers face various tax obligations, including income tax, social security contributions, and general sales tax.

Employer Income Tax Obligations

• Tax Rates: Income tax rates are progressive, ranging from 0% to 15%. The first YER 120,000 of annual income is tax-exempt. Income between YER 120,001 and YER 240,000 is taxed at 10%, and any income exceeding YER 240,000 is taxed at 15%.
• Withholding: Employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities within the first 10 days of the following month.
• Non-Resident Employers: For employees working for non-resident employers, the employee is responsible for filing the tax return. Expat employees must provide a tax clearance certificate to immigration authorities upon leaving Yemen permanently or after completing their job.

Social Security Contributions

• Employee Contribution: Employees contribute 6% of their basic monthly salary.
• Employer Contribution: Employers contribute 9% of the employee's basic monthly salary.
• Threshold: This scheme applies to employers with more than five employees, and registration is mandatory for eligible businesses.

General Sales Tax (GST)

• General Rate: The standard GST rate is 5%.
• Telecommunications Rate: A 10% rate applies to telecommunications and GSM services.
• Registration: Businesses with an annual turnover exceeding YER 50 million are required to register for GST. Voluntary registration is possible for businesses below this threshold.
• Filing and Payment: Registered entities must file a monthly sales tax declaration within the first 21 days of the following month.
• Withholding Tax: Entities withholding tax at the source must remit it within 15 days of payment. Penalties exist for late filing and tax evasion.

Corporate Income Tax (CIT)

• General Rate: The standard CIT rate is 20%. Higher rates may apply to specific sectors like telecommunications, oil, and gas.
• Tax Base: Resident entities are taxed on income generated inside and outside Yemen, while non-resident entities are taxed only on income from Yemen.
• Thin Capitalization: Yemen enforces thin capitalization rules, with a general debt-to-equity ratio of 70:30.

Other Taxes and Considerations

• A 10% withholding tax generally applies to payments to non-residents for interest, commissions, royalties, and service fees. However, exemptions exist for certain payments, such as those to foreign banks approved by the Yemeni Central Bank.
• Yemen also has real property taxes and a wealth tax. Information on inheritance or transfer taxes, if applicable, is not readily available.
• The tax and contribution rate as a percentage of profit in Yemen was reported at 26.6% in 2019.

This information is current as of February 5, 2025, and may be subject to change. It is crucial to consult official government resources or a qualified tax advisor for the latest regulations and specific details regarding employer tax obligations in Yemen.

In Yemen, employee tax deductions encompass various areas, including income tax, social security contributions, and other potential deductions.

Income Tax

• Taxable Income: Residents are taxed on income earned within Yemen, including salaries and wages, and income from foreign sources. Non-residents are taxed only on income earned within Yemen.
• Allowable Deductions: A non-taxable allowance of YER 10,000, the employee's social security contribution (6% of gross salary), and additional allowances up to YER 65,000.
• Tax Rates: Progressive rates for residents ranging from 10% to a maximum of 15%. Non-residents are subject to a flat rate of 20%. Bonuses and overtime are taxed at a flat rate of 15%.
• Withholding: Employers typically withhold income tax and remit it to the tax authorities. If the employer is non-resident, the employee may have a direct filing requirement.

Social Security Contributions

• Employee Contribution: Employees contribute 6% of their gross salary to the General Corporation for Social Security (GCSS).
• Employer Contribution: Employers contribute 9% of the employee's salary to the GCSS.

Other Deductions

• Vocational Training Contribution: Employers pay 1% of the employee's salary for vocational training.

It is important to consult with local tax advisors for specific details and up-to-date information.

Yemen's General Sales Tax (GST), similar to Value Added Tax (VAT), is levied on most goods and services during production, distribution, and import.

GST Rates

• Standard Rate: 5% applies to most goods and services.
• Special Rates: A 10% rate applies to certain telecommunications and mobile services. Cigarettes are taxed at 90%.
• Zero Rate (0%): Applies to exports of goods and services, international transport, and specific items like children's milk.
• Exemptions: Some goods and services are exempt, although specific details are not readily available for 2025.

Please note that the information provided here is based on data available up to February 5, 2025, and might not reflect the latest updates. It's crucial to consult official Yemeni government resources or tax advisors for the most current and detailed information. Further information on GST registration thresholds, filing requirements, and deadlines for 2025 could not be retrieved. However, you can typically find this information on the Yemen Tax Authority website or through consultation with a tax professional specializing in Yemeni tax law.

Yemen's tax incentives primarily focus on promoting investment and specific sectors. Key incentives include exemptions, reduced rates, and credits.

Corporate Tax Incentives

• General Corporate Tax Rate Reduction: The general corporate tax rate has been reduced from 35% to 20%.
• Investment Law Incentives: Tax incentives are primarily granted under the Investment Law of 2010. Projects registered under this law may benefit from a reduced corporate tax rate of 15%. Additionally, a special tax stabilization agreement may apply to the first five years of large-scale mining projects exceeding USD 150 million in investment.
• Small and Micro Enterprises: Small firms (annual turnover between YER 1.5 million and YER 20 million, with 3 to 9 employees) are subject to progressive tax rates from 10% to 20%. Micro entities (annual turnover under YER 1.5 million and fewer than 3 employees) are tax-exempt.
• Free Zone Incentives: Businesses within designated Free Zones are offered further incentives, including exemptions from industrial and commercial profit taxes for 15 years (with potential 10-year extensions), 100% foreign ownership allowance, unrestricted capital and profit transfer, and income tax exemptions for non-Yemeni employee salaries.

Individual Tax Incentives

• Personal Income Tax: Individuals are taxed at progressive rates, generally ranging from 10% to 15%. Non-residents are typically taxed at a flat rate of 20% on Yemen-sourced income. Specific rates and thresholds may vary based on residency status and income level. Certain income types, such as treasury bond interest, bank deposit interest, post office savings, and income from shares in public and shareholding companies, are tax-exempt.
• Early Filing Incentive: A rebate ranging from 0.5% to 1.5% is available for early filing of tax returns within the first three months of the following year.

Other Tax Provisions

• Withholding Tax (WHT): While dividends are generally exempt from WHT, interest paid to non-approved foreign banks is subject to a 10% WHT. Royalties, brokerage, and commission payments are typically subject to a 10% WHT.
• Foreign Tax Credit: A foreign tax credit is available, limited to the tax paid on income earned overseas.
• Value Added Tax (VAT): The standard VAT rate in Yemen is 5%.

Application Procedures

Specific application procedures for tax incentives vary depending on the type of incentive and the governing legislation. Businesses seeking to benefit from incentives should consult with the relevant authorities, such as the General Investment Authority or the General Taxes Department, for guidance on the necessary documentation and processes involved.

It's important to note that Yemen's tax laws and regulations can be complex and may change. Professional advice is recommended to navigate the system effectively. Additionally, the challenging political and economic situation in Yemen can influence the practical application and availability of incentives. Information is current as of February 5, 2025, and subject to change.