1First Edition | April 2024

1. Net fixed assets and the like, including - without limitation - the following: a. Assets financed for the Lessee under financial leasing contracts in Build, Operate, and Transfer (BOT) projects, Build, Own, and Operate (BOO) projects, or Build, Own, Operate, and Transfer (BOOT) projects, and other similar arrangements. Example (27): The National Electricity Company entered into a contract with the Eastern Energy Company to establish an electric power generation plant in Jubail Governorate at a cost of SAR 500,000,000. It was agreed that the Eastern Energy Company would construct and operate the plant for a period of 25 years, after which it would be transferred to the National Electricity Company under a Build, Operate, and Transfer (BOT) contract. The productive life of the plant is estimated at 30 years. Upon completion of the construction of the plant, it shall be recognized in the books of the Eastern Energy Company as a net investment in a finance lease contract in accordance with the applicable accounting standards. Pursuant to the agreement between the two companies, all electricity produced by the plant shall be sold to the National Electricity Company. How is the Zakat treatment of the net investment in the aforementioned finance lease contract determined for the Eastern Energy Company? Since the transaction in substance between the National Electricity Company and the Eastern Energy Company represents one of the forms of Build and Operate contracts, and the net investment in the finance lease contracts is classified as a non-current investment in the financial statements, the Eastern Energy Company has the right to deduct it from the Zakat base. 2.33 Deduction of Investment in a Fund from the Zakat Base The text of Article 77 of the Regulations provides: “Deduction of Investment in a Fund from the Zakat Base: The unit holder may deduct their investment in the fund from their Zakat base, provided that the following conditions are met: 1. Their investment in the fund is not held for trading purposes. 2. The Zakat due on their investment in the fund is calculated and paid to the Authority, either as part of their audited financial statements, or pursuant to a certificate prepared in accordance with the Regulations and certified by a licensed legal accountant in the Kingdom, in accordance with what is stated in Article 78 of the Regulations. 3. The financial statements of the investor, or the certificate referred to in Paragraph 2 of this Article, shall include the calculation of the Zakat of the unit holder. This shall be carried out through the calculation of the Zakat Base of the fund, then determining the number of units owned by them in the fund, and concluding with the calculation of the Zakat due from them. 4. In the event that the Zakat payer is unable to apply the provisions of Article 78 of the Regulations and to access the detailed data and provide it to the licensed legal accountant, the Zakat payer may apply the provisions of Article 46 of the Regulations for the purpose of deducting the value of the investment from the Zakat base. There is no material difference between what is stated in this Article and the rules governing the collection of Zakat from