1Second Edition | April 2020

Provisions and Conditions for Applying Exemption Rules to Entities Wholly Owned by Endowments from Zakat Collection Paragraph (2) of Article Seven of the Regulations refers to the following conditions for non- application of Zakat collection to a Zakat payer owned by an endowment. These may be detailed as follows: First: The Zakat payer must be wholly owned by an endowment, whether directly or indirectly. The ownership of the Zakat payer, whether directly or indirectly, must be entirely vested in one or more endowments, without any ownership (regardless of percentage) being vested in any other entities or persons, other than endowments duly registered and documented in accordance with the laws of the Kingdom. Accordingly, the decision does not apply to Zakat payers not wholly owned by an endowment, whether directly or indirectly. Example: Below are cases of Zakat payers owned by an endowment, whether directly or indirectly: y Zakat payer (X) is wholly owned by an endowment under direct ownership. y Zakat payer (X) is 60% owned by Endowment (Y), with the remaining share owned by Endowment (Z). y Zakat payer (X) is 90% owned by Endowment (Y), with the remaining share owned by Zakat payer (Z), noting that Zakat payer (Z) is wholly owned by natural persons. y Zakat payer (X) is 40% owned by Endowment (Z), with the remaining share owned by Zakat payer (Z), noting that Zakat payer (Z) is wholly owned by Endowment (E). Question: Determine whether the condition of full ownership of Zakat payer (X) by the endowment(s) is satisfied, noting that all the mentioned endowments are duly registered and documented in accordance with the laws of the Kingdom. Solution: Case Illustrative Diagram Condition Met / Not Met 1. Zakat payer (X) wholly owned by an endowment under direct ownership Zakat payer (X)  Endowment (100%) Satisfied 2. Zakat payer (X) 60% owned by Endowment (Y), and the remaining 40% owned by Endowment (Z) Zakat payer (X)  Endowment (Y) (60%) + Endowment (Z) (40%) Satisfied 3. Zakat payer (X) 90% owned by Endowment (Y), with the remaining 10% owned by Zakat payer (Z), noting that Zakat payer (Z) is wholly owned by natural persons Zakat payer (X)  Endowment (Y) (90%) + Zakat payer (Z) (10%) [owned by natural persons] Not Satisfied 4. Zakat payer (X) 40% owned by Endowment (Y), with the remaining 60% owned by Zakat payer (Z), noting that Zakat payer (Z) is wholly owned by Endowment (E) Zakat payer (X)  Endowment (Y) (40%) + Zakat payer (Z) (60%) [wholly owned by Endowment (E)] Satisfied