1Second Edition | April 2020

Exemptions from Zakat Collection and Related Conditions for Wholly State-Owned Companies Engaging in Commercial Activities and their Controls Companies wholly owned by the State that engage in commercial activities are exempt from Zakat collection pursuant to Ministerial Resolution No. (57732) dated 3 Dhul-Qi‘dah 1443 AH (corresponding to 29 June 2022), provided that any of the following conditions are met during the fiscal year: 1. All of the company’s investments are located outside the Kingdom. This means that the company’s primary purpose is to invest in entities and activities outside the Kingdom, without holding any direct or indirect investments within the Kingdom. For the purposes of this Resolution, investments outside the Kingdom shall include: y Ownership of equity interests in foreign companies, including investment funds established outside the Kingdom. y Financial instruments such as debt instruments, including bonds and deeds of all types, regardless of maturity date or source. Example: Company (X) is wholly owned by the State. It engages in a licensed commercial activity and holds a valid commercial registration issued by the Ministry of Commerce. Its principal business activity is investment, and its policy is to invest solely in foreign companies and entities, with no direct investments inside the Kingdom. Question: Should Company (X) be subject to Zakat collection pursuant to Ministerial Resolution No. (57732), bearing in mind that its activity could otherwise be undertaken by the private sector? Solution: Company (X) is wholly owned by the State, holds a valid commercial registration, and its business activity could be undertaken by the private sector. However, pursuant to the Ministerial Resolution, all of its investments are located outside the Kingdom of Saudi Arabia. Accordingly, Company (X) qualifies for the exemption provided under Ministerial Resolution No. (57732) with respect to Zakat collection. Therefore, it is not subject to Zakat collection. Example: Company (X) is wholly owned by the State. The company engages in a licensed commercial activity in the Kingdom and holds a valid commercial registration issued by the Ministry of Commerce. Its principal activities consist of various forms of investment. At the end of the fiscal year, the audited financial statements and accompanying notes showed the following: Assets Amount (SAR) Explanation Cash and cash equivalents 1 million Investments at fair value through other comprehensive income 50 million 50 million represented by shares in listed and unlisted companies outside the Kingdom of Saudi Arabia Investments at amortized cost 4 million Represented by investments in debt instruments and deeds issued by companies and governments inside and outside the Kingdom Total assets 55 million