Financing Activites

Practical examples Example (7): Calculation of the minimum and maximum limits when calculating the net profit Based on the data in example 6 where Zakat base of bank A was calculated at SAR 31,218,559. To apply the rule of minimum and maximum limit by verifying the net profit amount in the bank’s income statement of SAR 2,361,795, the upper and lower limits are calculated as follows: Through the above, Zakat base calculated in accordance with the Rules is greater than the upper limit (SAR 18,894,360) and accordingly the upper limit (SAR 18,894,360) is adopted as a Zakat base for the purposes of these Rules and the calculation of zakat. If the Zakat base in accordance with the above equation is SR (15,122,120), then the same amount shall be adopted as a Zakat base in accordance with the Rules because it falls between the minimum and the maximum calculated limits above. In cases where the Zakat base calculated in accordance with the Rules is less than the minimum limit (SAR 9,447,180), the minimum limit will be adopted as a Zakat base. Net profit Minimum limit (4 times net profit) Cap (8 times net profit) 2,361,795 SAR 9,447,180 SAR 18,894,360 SAR Example (8): Calculation of the minimum and maximum limits in case the Zakat payer does not achieve a net profit and achieves a gross profit The income statement reflected the following data for a financial institution licensed by SAMA as at 31/ 12/ 2019 Item Amount Gross profit SAR 3,000,000 Net profit (loss) before Zakat provision SAR (1,500,000) The Company has calculated the Zakat base in accordance with the Zakat calculation rules for financing activities amounting to SAR 2,000,000. Since the company has not achieved a net profit, the gross profit is adopted as a basis for calculating the Zakat base as follows: Since the Zakat base of SAR 2,000,000 is between the minimum and the maximum limits calculated in the table above, the same amount shall be used as the basis for calculating Zakat. 3.4 Zakat declaration for financing activities