22Different Activities

Definition of the Sector The mining sector is defined as the extraction of minerals that are naturally present as solids (e.g., coal), liquids (e.g., oil), or gases (e.g., natural gas). Extraction can be carried out in various ways, such as underground or surface mining, well operations, or seabed mining. This sector also includes: ● Coal mining ● Extraction of crude oil and natural gas (taxable and non-zakatable) ● Mining support services activities Zakat issues pertaining to the sector Spare parts Spare parts are parts that are used for the maintenance of machinery and equipment that are not intended for sale and are used in the activity. 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 (23): A company operating in the extraction of minerals has a balance of spare parts shown in the financial statements as of December 31, 2019, amounting to SAR 1,000,000. What is the amount to be deducted from the Zakat base? The balance of spare parts inventory, shown in the financial statements as of December 31, 2019 and amounting to SAR 1,000,000, is fully deducted from the Zakat base, since spare parts are considered non-zakatable assets. They are not intended for sale in their current condition. The Most Important Items in the Statement of Financial Position for Mining and Quarrying Sector and Their Zakat Treatment Item Item Nature Zakat Treatment Judgment Non-current assets Capital projects in progress Representing projects under development Deductible assets Deductible from the Zakat base because they are non- Zakatable assets Mine / site closure costs Representing costs incurred when the mine is depleted Deductible assets Deductible from the Zakat base because they are non- Zakatable assets Sea port facilities Representing costs of seaport infrastructure and facilities Deductible assets Deductible from the Zakat base because they are non- Zakatable assets Current liabilities Concession fees payable Amounts due for payment against the right of exploitation External sources of funds utilized in financing deductible asset Not added to the Zakat base unless its maturity is more than 354 days Current portion of an obligation under a finance lease The amount of the obligation under the finance lease contract which is due within less than one year External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets Non-current liabilities Due to a joint venture partner Representing the payable balance to the partner External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets Provision for mine closure obligations, removal, site restoration, plant dismantling, waste treatment and disposal The amount of liabilities that are expected to arise from the restoration of the site and the dismantling of the plant Internal funding sources Added to the Zakat base to arrive at the Zakatable assets Non-current portion of an obligation under a finance lease The amount of the liabilities under the finance lease contract that is due for payment within more than one year External sources of funds utilized in financing deductible asset Added to the Zakat base to meet deductible assets