Employers have a significant role in managing taxes related to their employees' salaries. They are responsible for withholding income tax from employee salaries and remitting it to the tax authorities within the first 10 days of the month following the withholding. Additionally, employers must provide accurate income reports to both employees and tax authorities to facilitate tax return filing.

Social Security Contributions

Employers also have responsibilities concerning social security contributions. They are required to contribute 9% of the employee's gross salary, while the employee contributes 6%. Employers must register their business with the relevant social security authorities. They are responsible for deducting employee contributions, adding their own contributions, and submitting the total amount to the social security authorities on a monthly basis.

Additional Considerations

There are additional considerations for employers regarding taxes. They may have an obligation to pay Zakat, a religious tax. It's essential to consult with relevant religious authorities to determine your business's obligation. Employers should also be aware of potential skills development levies or local taxes specific to their business location or industry.

In Yemen, employees are required to contribute a certain percentage of their gross salary to the General Corporation for Social Security (GCSS). This mandatory contribution, which is 6% of the salary, provides benefits such as retirement pensions, disability insurance, and unemployment support.

Income Tax

Yemen operates a progressive income tax system for resident employees, meaning that higher income levels are subject to higher tax rates. The tax rates for resident employees range from 10% to 15%. On the other hand, non-resident employees are generally subject to a flat income tax rate of 20%.

Zakat

Zakat is an obligatory charitable contribution for Muslims, calculated based on their wealth and income. Although it's not technically a government tax, it's an important consideration for Muslim employees in Yemen. The Zakat rate is generally 2.5% of eligible assets.

Yemen has implemented a Value-Added Tax (VAT) system, which is applied to most goods and services supplied within the country. There are various rates of VAT applied to goods and services in Yemen, with the general rate being 5%. However, a 10% rate applies to some telecommunications and mobile communications products or services.

VAT Rates for Services

The VAT rate for services in Yemen typically depends on the specific type of service being supplied.

• Standard Rate (5%): The majority of services fall under the standard VAT rate of 5%. This includes a broad range of services, such as professional services, consulting, maintenance, and others.
• Higher Rate (10%): Certain telecommunications and mobile communication services are subject to a higher VAT rate of 10%.

VAT Registration

Businesses in Yemen that exceed a specific annual turnover threshold are required to register for VAT. This threshold is determined by the Yemeni tax authorities.

VAT Invoicing

Businesses supplying taxable services in Yemen must issue VAT-compliant invoices to their customers. These invoices must contain specific details as required by the Yemeni tax regulations, including:

• Supplier's name, address, and VAT registration number
• Customer's name and address (if a taxable person)
• Date of invoice
• Description of the services supplied
• Taxable value of the services
• VAT amount charged

VAT Filing and Payment

Businesses registered for VAT must file periodic VAT returns with the Yemeni tax authorities. These returns summarize the VAT collected on sales and the VAT paid on purchases (input VAT). Any VAT due must be paid to the tax authorities within a specified timeframe.

Exemptions and Zero-Rating

Certain services may be exempt from VAT in Yemen or subject to a zero-rate, meaning no VAT is charged on the supply of these services. Examples include financial services, some educational services, and some healthcare services.

The Investment Law (Law No. 22 of 2010) provides tax and customs duty exemptions for specific projects. The duration and extent of these exemptions depend on the sector, location, and size of the investment. Sectors that could benefit from these exemptions include Industry and Mining, Agriculture and Fisheries, Hotels and Tourism, Hospitals and Health Facilities, Education and Training, Housing, Transportation, and Media.

Tax Holidays

Newly established businesses may be eligible for full or partial tax holidays of varying periods. This usually applies to income tax.

Accelerated Depreciation

Businesses may be permitted to depreciate assets at a faster rate than normal, allowing for quicker tax deductions.

Import Duty Exemptions

The import of certain machinery, equipment, and raw materials critical for eligible projects or sectors might be exempt from import duties.

Double Taxation Treaties

Yemen has double taxation treaties in place with certain countries. These treaties help prevent businesses from being taxed twice on the same income.