General Manual of Zakat

Those Subject to Zakat The following table indicates those subjects to zakat and who engage in the activity2: Saudi natural persons residing in the KSA and those who are treated as nationals of the Gulf Cooperation Council States. Companies residing in the KSA with respect to the shares of Saudi partners and those who are treated as nationals of the Gulf Cooperation Council States, and anyone who engages in the activity based on a license issued by a competent government or administrative entity in accordance with the controls set by ZATCA. This includes the permanent establishment owned by non- resident Saudis and those who are treated as such if the key management conditions apply to the permanent establishment. Shares of non-Saudi partners in companies residing in the KSA listed on the Saudi Stock Exchange who are not founders and their replacements in accordance with the Memorandum of Association or legal documents, and the shares of Saudi government entities and institutions. 1 ) Article (16), Registration with ZATCA, Executive Regulations. 2 ) Article (2), Those Subject to Zakat - according to the ZATCA's Conditions, Executive Regulations. The headquarters of the key management is considered in the KSA when at least two of the following conditions are met: ● Holding the usual meetings of the Board of Directors on a regular basis in the KSA and by whatever means such meetings are, during which the main policies and decisions related to the management of the establishment and the conduct of its business are made.3 ● Making senior executive decisions related to the management of the company's functions, such as: Decisions of the Executive Director and his deputies in the KSA. ● The business of the establishment from which more than fifty percent (50%) of its revenues are generated shall be in the KSA. The following is a presentation of the cases where a non-resident taxpayer is considered subject to zakat, in accordance with the fulfillment of the subject conditions stipulated in the Regulations: Nationality of the company owner Key Management Conditions (at least two conditions) Subject Impact Saudi* Holding the usual meetings of the Board of Directors in the KSA. Zakat Regulations Zakat on an establishment and its branches inside and outside the KSA Making senior executive decisions in the KSA. Making more than (50%) of revenues in the KSA. Saudi* Inapplicability of the conditions Income Tax Law Tax on the KSA branch only 3 ) Article (2), Those Subject to Zakat - at least two conditions shall be met, Executive Regulations. Accordingly, it becomes clear that if a Saudi (and those of the GCC citizens who are accorded the same treatment) establishes a company outside the KSA and opens a branch for it in the KSA, it is subject to zakat if the main management conditions are met in the branch, and the company and all its branches are accounted for zakat. If the main management conditions are not met, the branch is only subject to the Income Tax Law without the Executive Regulations for Levying Zakat. Those Subject to Zakat Nationality of the company owner (Saudi) Key Management Conditions (at least two conditions) ● Holding the usual meetings of the Board of Directors in the KSA. ● Making senior executive decisions in the KSA. Making more than (50%) of revenues in the KSA. Subject: Zakat Regulations Impact: Zakat on an establishment and its branches inside and outside the KSA Saudi: Main Management Conditions Inapplicability of the conditions Subject: Income Tax Law Impact: Tax on the KSA branch only Example (4): A company established outside the KSA, owned by Saudi persons, and operating in and outside the KSA. Its Board of Directors meetings are held in the KSA and its income from the KSA is more than 50% of its revenues. How does the company calculate the zakat? The following shall be excluded from the application of zakat and above-mentioned provisions: ● Resident investment companies with respect to the shares owned directly or indirectly by the taxpayer working in the field of oil and hydrocarbon production, whether a natural or legal person, resident or non-resident. ● The taxpayer in respect of whom a decision is issued by the authority not to be subject to levy of zakat - from the date on which the provisions of the regulation come into force - after he has registered with the authority, and submitted to it a request not to be subject to zakat levy, with his obligation to submit the declaration of information according to the statutory dates. ● In any case, very taxpayer engages in a commercial activity shall register, even if it is a charitable endowment, state investment, government entity or consortium. ZATCA shall consider requests for non-subject in accordance with the established rules, and the same shall issue, in respect of which, a decision to subject or not.