22Different Activities

Additions to the Zakat Base Below are examples of items to be added to the Zakat base, with some guidelines mentioned in the next section along with some examples for further clarification: Group Item Amount Equity and equivalent Capital at the beginning of the year Increase in capital during the year Reserves carried forward from previous years Retained earnings from previous years Adjusted net profit for Zakat collection purposes Change in fair value resulting from revaluation Provisions Long-term and similar obligations of the Zakat payer The zakat payer's classified long-term liabilities and their equivalents Opening provisions after deducting the used part during the year Creditors Notes payable Loans and equivalents + current installments of loans Partners or owners' loans Retained amounts from contractors (performance bonds) Amounts due to related parties Profits under distribution 3.1.3. Items to Be Excluded from the Zakat Base The following are examples of items that are not to be added to the Zakat base: 3.1.4. Requirements for adding to the zakat base The capital shall be added to the Zakat base according to the following guidelines: ● The opening balance shall be added. ● The increase in the capital during the year shall be added in full if its source is internal (equity). ● The capital increase during the whole year shall be added if it finances any of the deductible items from the Zakat base. ● The increase in capital shall be added if it has not financed a deductible asset from the base in proportion with the number of days of the zakatable year. It shall be treated as a finance source referred to in Article 4, paragraph (3/a), of the implementing regulations. Group Item Amount Obligations of the Zakat payer classified as short-term and equivalent, unless it is known that they were used for financing deductible assets Loans Creditors Accrued expenses Notes payable Overdraft account Retention payable Amount due to related parties Full opening balance The capital is added to the Zakat base Increase during the year in full in two cases: The addition that has not financed a deducted item shall be added. ● In case of internal source ● If financed a deducted item Example (6): A company increased its capital during the year by SR 10,000,000 as of 01/7/2019, as follows: 1. SAR 3,000,000 transfer from the general reserve. 2. SAR 7,000,000 increment in the capital contributed by one of the partners, of which SAR 5,000,000 was used to purchase a new production line and SAR 2,000,000 to finance the purchase of goods and raw materials. What is the amount that should be added to the Zakat base? 1. The amount of SAR 3,000,000, which is the increase taken from the general reserve, shall be added to the Zakat base as it is an internal transfer from an element of the equity. 2. The amount of SAR 5,000,000, which is the increase made to finance the purchase of a new production line, shall be added to the Zakat base because it financed a deductible asset. 3. The amount of the increase made to finance the purchase of goods and raw materials (SAR 2,000,000) shall be added by the number of days, as it is a source of other financing. It is treated as an obligation of the Zakat payer. Consequently, an amount of SAR 1,000,000 is added as calculated below, with the oblitions not e ceeding the deductible amount from the base, as follows: Number of days left remaining until the end of the fiscal year Number of the year days 366 X The increase value X Reserves: 1. The balance of the first period shall be added if the balance remains until the end of the year, but if it is disposed of during the year, such as cash and other distributions, the portion disposed of may not be added to the Zakat base 2. If the reserves are transferred to an equity account, they shall be added to the base for the full term within the equity.