22Different Activities

Definition of the Sector This sector is defined as the process of the natural or chemical conversion of materials or components into new products. The materials or components being converted are raw materials that represent products from agriculture, forestry, fishing, mining, or quarrying, as well as products from other manufacturing activities. Material change, refurbishment, or restructuring of goods is generally considered part of the manufacturing industry. The output of the manufacturing process may be a finished product, in the sense that it is ready for use or consumption, or it may be a semi-finished product, in the sense that it serves as an input to another industrial process. This sector also includes: ● Processing of food products. ● Manufacturing of drinks. ● Manufacturing of textiles. ● Manufacturing of clothing. ● Manufacturing of leather and related products. ● Manufacturing of timber, wood products, and cork (except furniture). ● Manufacturing of paper and paper products. ● Printing and reproducing recorded media. ● Manufacturing of coke and refined petroleum products. ● Manufacturing of chemicals and chemical products. ● Manufacturing of basic pharmaceutical products and pharmaceuticals. ● Manufacturing of rubber and polymer products. ● Manufacturing of other non-metallic mineral products. ● Production of base metals. ● Manufacturing of fabricated metal products (except machinery and equipment). ● Manufacturing of computers, electronic, and optical products. ● Manufacturing of electrical equipment. ● Manufacturing of machinery and equipment not specified in other categories. ● Manufacturing of motor vehicles, trailers, and semi-trailers. ● Manufacturing of other transport equipment. ● Manufacturing of furniture. ● Repair and installation of machinery and equipment. Zakat issues pertaining to the sector Spare parts Spare parts are parts that are used for the maintenance of machinery and equipment and are not intended for sale. Spare parts are considered non-zakatable assets and are deductible from the Zakat base as they are not intended for sale in their current state, according to the Implementing Regulations. Example (25): A company operating in the production of iron has spare parts with a balance of SAR 3,000,000 shown in the financial statements as of December 31, 2019. What is the amount to be deducted from the Zakat base? The balance of spare parts inventory shown in the financial statements as of 31 December 2019, amounting to SAR 3,000,000, is fully deductible from the Zakat base, as spare parts are considered non-zakatable assets because they are not intended for sale in their current condition. The Most Important Items in the Statement of Financial Position for the Manufacturing Industries Sector and Their Zakat Treatment Item Item Nature Zakat Treatment Judgment Current assets Industrial plant and equipment The cost of assets is calculated according to their production capacity based on the method of production units on proven and probable recoverable reserves Deductible assets Deductible from the Zakat base because they are non- zakatable assets Platin Representing assets used in production that are not depreciated as it is a precious metal and its value is not reduced by use Deductible assets Deductible from the Zakat base because they are non- zakatable assets Non-current assets Liabilities directly related to transformation of fixed assets The amount of liabilities against acquisition of assets classified as property and equipment External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets Liabilities for the costs of dismantling and removing property, plant and equipment The amount of liabilities arising from site restoration and thedismantling of property, plant and equipment External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets Concession fees Representing prescribed fees at 52% of the net annual income of each mining license or as determined by Law External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets