Zakat for companies is the levy that Saudi companies, and the Saudi and GCC-owned share of companies in the Kingdom, pay to ZATCA under the Implementing Regulations for Zakat Collection. It is 2.5% of the zakat base for a Hijri year, adjusted by days for other fiscal years, and the return and payment are due within 120 days after the year end.
What is zakat for companies in Saudi Arabia?
Zakat is one of the pillars of Islam. For businesses in Saudi Arabia, ZATCA collects it under the Implementing Regulations for Zakat Collection, issued by Minister of Finance Decision No. 1007 dated 19/08/1445H and amended by Decision No. 1248 dated 11/10/1446H.
They apply to, among others, resident Saudis with a licensed activity, companies established in the Kingdom for the share held by Saudi partners, licensed finance funds, resident companies owned by the state or the Public Investment Fund, and non-Saudi shareholders other than founders in companies listed on the Saudi Exchange (Article 3). "Saudi" includes GCC nationals treated like Saudis (Article 1).
How is zakat calculated?
- Add the sources of fundsStart from equity and its equivalents. Add non-current liabilities, such as long-term debt, end-of-service and leave provisions, lease obligations and deferred tax, within the limits the regulations set, and the difference between adjusted and book net profit (Articles 23, 24 and 29).
- Deduct the long-term assetsDeduct, among others, net fixed assets, intangible assets, qualifying investments in the Kingdom and abroad, statutory deposits and deferred tax assets (Article 26).
- Apply the minimum baseIf the base falls below adjusted net profit, the minimum base rules apply. A negative base with no adjusted net profit means no zakat base (Article 27).
- Apply the rateZakat is 2.5% of the zakat base for a Hijri year. For a fiscal year that is not Hijri, divide 2.5% by the number of days in the Hijri year and multiply by the days in the fiscal year (Article 15).
- Apply the ownership shareWhere only part of the company is subject to zakat, the zakat applies to that share.
- File and paySubmit the return in ZATCA's e-system and pay within 120 days after the end of the zakat year. If the last day is an official holiday, the deadline moves to the next working day (Article 102).
What does a zakat calculation look like?
Why does zakat matter for finance teams in Saudi Arabia?
Zakat is computed from the balance sheet, not only from profit, so financing, investment and classification decisions all move the base.
Estimate it during the year, accrue it monthly and keep workings for each part of the base. A holding company and its wholly owned subsidiaries may submit consolidated accounts and a consolidated zakat return (Article 16), a different exercise from the group's consolidated financial statements.
This page is general information, not zakat or tax advice. Companies paying non-residents must also withhold tax; see withholding tax. Confirm your computation with ZATCA's guidance or your adviser.
Questions people ask
What is the zakat rate for companies in Saudi Arabia?
2.5% of the zakat base for a Hijri year. For a Gregorian or other fiscal year the rate is adjusted by days: 2.5% divided by the days in the Hijri year, multiplied by the days in the fiscal year, which is about 2.578% for a 365-day year against a 354-day Hijri year.
When is the zakat return due?
Within 120 days after the end of the zakat year, together with payment of the zakat due. If the last day is an official holiday, the deadline moves to the next working day.
Do foreign shareholders pay zakat?
Zakat applies to the share held by Saudis, including GCC nationals treated like Saudis, and to shares held by non-Saudi shareholders in companies listed on the Saudi Exchange, other than founders. For other foreign ownership, check the income tax rules with your adviser.
Official and primary sources, read on the date shown. Rules change: confirm with the authority or your adviser before you act.