1First Edition | April 2024

“By way of exception to the relevant laws, the Zakat, Tax and Customs Authority shall, in coordination with the Ministry, set the necessary rules for non-profit companies not to be subject to the provisions of Zakat collection and to be exempt from taxes.” Given that non-profit companies are subject to the Companies Law in all its provisions set forth in the Law and its Implementing Regulations, Paragraph 3 of Article 7 of the Regulations has detailed the Zakat-related rules under which non-profit companies may be accepted as not subject to Zakat collection, as follows: 1. That the channels and fields of the company are stipulated in its Articles of Incorporation or Bylaws, and that they do not fall outside the fields and channels stipulated in Article 70 of the Implementing Regulations of the Companies Law relating to public non-profit companies. 2. That the amount spent on any beneficiary does not exceed 10% of the company’s revenues, whether such spending is on owners, members of the board of directors, or any company expenditure item allocated to a beneficiary. 3. That the company’s expenses are substantiated through audited financial statements or a report submitted by a licensed legal accountant in the Kingdom, evidencing all company expenses, or any other documents accepted by the Authority. 4. In comparison with the Implementing Regulations for Zakat Collection - Edition 1440H, this Zakat treatment constitutes a new treatment specifically applicable to non-profit companies approved under the Companies Law issued on 1st Dhu Al-Hijjah 1443H/30th June 2022G. Example (1): y A non-profit company was established in accordance with the provisions of the Companies Law, and its Articles of Incorporation do not stipulate the company’s fields and channels or stipulate a field or channel other than those prescribed for public non-profit companies. Is the company entitled to request an exemption from being subject to Zakat? This company shall be subject to Zakat collection due to the non-fulfillment of the exemption conditions outlined in the Regulations. y A non-profit company established in accordance with the provisions of the Companies Law submitted a request not to be subject to Zakat. The total expenditures on a beneficiary amounted to 7% of the company’s revenues; however, the company did not submit audited financial statements or a report from a licensed legal accountant in the Kingdom substantiating the accuracy of its expenses. Is the company entitled to request an exemption from being subject to Zakat? This company shall be subject to Zakat collection due to the non-fulfillment of the exemption conditions set forth in the Regulations, as the Zakat payer did not submit evidence substantiating the accuracy of its expenses; accordingly, it shall not be exempt from Zakat collection. y The amount spent by the company on members of the board of directors amounted to 20% of the company’s revenues. Is the company entitled to request an exemption from being subject to Zakat? This company shall be subject to Zakat collection due to the non-fulfillment of the exemption conditions set forth in the Regulations, as the amount spent on members of the board of directors exceeded 10% of its revenues.