As an indication of the great status of Zakat in Islam; the government is charged with managing and supervising the collection of zakat on declared funds and its distribution to beneficiaries. The Zakat collected by the General Authority for Zakat & Taxes is deposited in the Social Services Department. Established by Ministerial Resolution No. 394, dated 713708//H, as one of the government bodies under the Ministry of Finance, and charged with the task of collecting Zakat.
Monitor the zakat payer and take necessary steps to ensure that the amounts due are collected. To strive to raise the awareness of the zakat payer and to strengthen the level of voluntary commitment and to ensure his compliance with the instructions and guidelines issued by the authority under his jurisdiction. This guide presents the concept and interpretation of the authority on how to apply the implementing regulations for zakat levy issued 714407//H.
It is not intended to include all relevant provisions of the Zakat Tax Implementation Regulations. At this time, it is carried out by the General Authority of Zakat and Taxes on behalf of the state, in accordance with the relevant laws, regulations and rules.
Zakat Year
Zakatable year (Al Hawl)
The reason for accounting based on daily basis is the impossibility of completing a Hijri year for each zakat fund, the difficulty of tracking the internal operations (transactions) of the economic entity and the impossibility of forcing the economic entity to issue financial statements only for the purposes of zakat. .
How to calculate completion of the Hijiri year
Business activities
- Terms of obligations and their impact on Zakat
Commercial activities include real estate, commodity trading, provision of services, securities, financing, insurance and all banking activities. The Sharia imposes Zakat on all kinds of commercial activities according to the Hadeeth of Jabir bin Samra - may Allah be pleased with him - who narrated (The Messenger of Allah - peace be upon him - ordered us to pay Zakat against what we prepare for sale). Generally, the Zakat payer's obligations reduce the Zakat payer's Zakat base by not adding them to the base in accordance with the method adopted by the authority.
However, there is a difference in the accounting treatment between short-term and long-term debt. Current liabilities that have financed a deductible asset will be added to the basic Zakat components, unlike liabilities that have not financed a deductible asset, which will not be added to the basis. Long-term liabilities are added to the components of the basis, on the understanding that the total liabilities do not exceed the amount of the deductible assets.
This is taken to ensure that Zakat funds are not spent on debts. Debts are secured by fixed assets and equivalent deductible assets, even if he did not finance such assets, in order to meet balance and fairness and avoid double deduction.
Guidelines for adding Long-Term Obligations to the Base
Use of funds 2. Sources of funds
Guidelines for adding Short-Term Obligations to the Base
Zakat Declaration
Assessment
Commercial Books
Addition of all Zakatable assets of the entity including receivables of the Zakat payer. The result of this formula is the Zakat base for the Zakat payer.ZB = Zakatable Assets - Obligations Financed. Sources of external funds used for the component deductible from basis, which includes long-term liabilities and liabilities known to have financed deductible assets.
The value of the entity's non-deductible assets, which are deducted in accordance with the terms of the regulations. The value of Zakatable assets in other entities such as: (investments in shares of Saudi companies).
ZATCA's method to Calculate Zakat Base
Deemed Calculation
A method used by an authority to account for a zakat payer who does not keep business books and statutory accounting. This is because the origin of the zakat of the zakat payer is that it is based on his marital records, which contain information through which the base can be identified. If this is not achieved, the authority formulates the zakat base according to the available information so that the zakat base can be estimated as accurately as possible.
The Authority uses the presumptive method when the zakat payer does not respect the deadlines for submitting the declaration, or there are problems related to the Authority's confidence in the accuracy of the data provided by the zakat payer, according to the zakat. records of the payer in order to get as close as possible to its correct basis.
The Basis of Zakat Calculation
- Identify Zakat Base for Zakat Payer Maintaining Commercial Books
- Components of Zakat Base (Additions)
- Items of Zakat Base (Deductibles)
- Adjustment to the Result of Business
- Expenses that may be deducted
- Non-deductible Expenses
- Transport and Storage Sector
- Definitions related to the sector
- Practical Examples
- Appendix: Frequently Asked Questions (FAQ)
- Is it permissible for an entity to deduct the employees’ share in the regular pension funds such as the retirement pension, social insurance or saving funds from the Zakat
- What are the expenses that may be deducted from the Zakat base?
- Is it permissible for an entity to deduct bad debts from the Zakat base? What are the guiltiness for that?
- Is it permissible for the owner of the entity to deduct his salaries and allowances from the Zakat base?
- How is the capital increase calculated when it is unknown that it financed a deductible asset?
- How is the Zakat payer accounted for in case the fiscal year is longer than the Hijri year (354 days)?
The capital increase during the whole year will be added if it finances any of the deductible items from the Zakat base. If reserves are transferred to one of the equity accounts, they will be added to the basis for the entire period within equity. They will be added to the Zakat base at the opening balance of the period minus dividends paid during the Zakat year.
Dividends from the current year are counted among the negative additions to the zakat base if they exceed the amount of retained earnings. Add to basis at beginning of period minus dividends distributed between. The total amount of liabilities added to the zakat base as mentioned in the above points should not exceed the total deductions from the base.
Obligations of the Zakat payer and equivalents referred to in the additions above will be added to the zakat base. The Total Amount of the obligations added to the Zakat base, as stated in the above items, shall not exceed the total. If the Zakat base is the minimum limit (adjusted profits), the amount used is deducted as a deductible expense from the adjusted net profit, provided that the net profit is compared to the base after the deduction is made (when reversing the effect of the amount used on the base supply) and the larger of the two is considered.
If the Zakat basis is the minimum limit (adjusted profit), the amount used as a deductible expense is deducted from the adjusted net profit, provided that the net profit is compared with the basis after the deduction has been made (when reversing the effect of the amount used on the basic provision) and the larger of the two is taken into account. The provision set aside during the zakat year will be (added to/deducted from) the (profit/loss). The change in fair value, calculated in accordance with Article VI(6) of the Regulation, shall be added to the components of the zakat basis.
The company has the right to deduct the cost of the project (SAR from the Zakat base for this year. Is it permissible for the owner of the unit to deduct his wages and allowances from the Zakat base. Actual number of days in the Zakat year for the Zakat payer The number of days in the Hijri year.
