1Issue 1 | September 2024

Applied Examples Example 7: Calculation of the lower and upper limits of the Zakat base in case of achieving a net profit, based on the data provided in Example 6, where the Zakat base for Bank A was calculated at SAR 31,218,559. To apply the lower and upper limit rule by verifying the net profit amount stated in the bank’s income statement, which is SAR 2,361,795, the upper and lower limits are calculated as follows: Net Profit (Lower Limit) 4 times Net Profit (Upper Limit) 8 times Net Profit SAR 2,361,795 SAR 9,447,180 SAR 18,894,360 Based on the foregoing, the Zakat base calculated in accordance with the rules of the Regulations exceeds the upper limit of SAR 18,894,360. Accordingly, the upper limit of SAR 18,894,360 shall be adopted as the Zakat base for the purpose of calculating the legally-mandated Zakat. Where the Zakat base calculated in accordance with the prescribed formula amounts to SAR 15,122,120, the same amount shall be adopted as the Zakat base, as it falls between the calculated lower and upper limits. In cases where the calculated Zakat base is below the lower limit of SAR 9,447,180, the lower limit shall be adopted as the Zakat base. Example 8: Calculation of the lower and upper limits of the Zakat base where the Zakat payer does not achieve a net profit but achieves a gross profit: The income statement for a financial company licensed by the Saudi Central Bank as of 31st December 2024G shows the following data: Item Amount Gross profit SAR 3,000,000 Net (loss) before Zakat provision (SAR 1,500,000) The company calculated the Zakat base in accordance with the Zakat Regulations at SAR 2,000,000. Since the company did not achieve a net profit, the gross profit is used as the basis for determining the lower and upper limits of the Zakat base, as follows: Gross Profit Lower Limit (40%) of Gross Profit Upper Limit (80)% of Gross Profit SAR 3,000,000 SAR 1,200,000 SAR 2,400,000 As the calculated Zakat base of SAR 2,000,000 falls between the lower and upper limits shown above, the same amount shall be adopted as the basis for calculating Zakat. 3.4 Zakat Return for Financing Activities 3.4.1 Method of Preparing and Submitting the Return: ZATCA has adopted a specific Zakat return form for financing activities Zakat payers, which includes the mechanism for calculating the Zakat base and Zakat in accordance with the Regulations (the Pro-rata Method). Accordingly, Zakat payers are required to submit the Zakat return and pay the Zakat due thereunder to ZATCA within a period not exceeding 180 days from the end of the Zakat Year. If the end of this period coincides with an official holiday, the due date shall be extended to the first working day following the holiday. The accounts Zakat payer must also submit the Zakat return using the designated Zakat return form for accounts Zakat payers through ZATCA’s electronic system, along with supporting documents corresponding to the information reported in the return. Zakat dues must be paid via bank transfer through the “SADAD” system or through any other payment methods approved by ZATCA.