Zakat

Meaning

Zakat (الزكاة), for a business, is the levy the Zakat, Tax and Customs Authority collects from companies owned by Saudi and GCC nationals in place of income tax; a company with foreign shareholders pays zakat on the Saudi share and income tax at twenty percent on the rest. The rate is two and a half percent of the zakat base, which starts from equity and long-term funding, deducts assets not subject to zakat such as fixed assets and long-term investments, and is never less than the year's adjusted net profit. Because the base is built from the balance sheet, a loss-making company with large equity still pays.

The return is filed within 120 days of the year end, from audited or at least properly kept accounts, and ZATCA issues the zakat certificate that government tenders and final contract payments require.

Also called: corporate zakat · zakat base · zakat certificate

Example

Al Noor's equity is 293,000.00 at year end, its net adjusted profit 119,000.00 and its fixed assets 90,000.00. A simplified base of 293,000 less 90,000 is 203,000.00, above the profit floor, so zakat is about 5,075.00; the return and payment are due by the end of April.