General Manual of Zakat

Registration for consolidated zakat declaration purposes: Article (15) of the Executive Regulations for Levying Zakat stipulates that «companies owned by the same partners, holding company and fully owned subsidiaries both in and out the KSA, whether directly or indirectly owned, may submit consolidated accounts and consolidated zakat declaration and accordingly shall be accounted for on basis of the results reported in one consolidated zakat base».8 Direct ownership means that the subsidiary is 100% one hundred percent owned by the holding company. Indirect ownership means that the subsidiary is owned in a certain percentage by the holding company, with the remaining percentages are owned by any of the other subsidiaries wholly owned by the holding company. In the event that the taxpayer wants to submit a consolidated zakat declaration, the same shall submit a request to ZATCA to do so, with the ZATCA's right to approve or reject the consolidation request, and then the subsidiaries shall submit an information declaration for each company separately, within the statutory time limits specified for the submission of declarations.9 8 ) Article (15), ZATCA allows the submission of consolidated accounts and a consolidated zakat declaration, Executive Regulations. 9 ) Article (15), Executive Regulations. Example (6): Companies (A), (B) and (C) below are Saudi companies registered with ZATCA, and submit zakat declarations on an annual basis, when reviewing their ownership; it is noted that the ownership structure is as follows: Example (7): Companies (A) to (D) below are Saudi companies registered with ZATCA, and submit zakat declarations on an annual basis, when reviewing their ownership; it is noted that the ownership structure is as follows: Company (A) owns 100% of both companies (B) and (C), does the principle of submitting a consolidated zakat declaration apply to these companies? Referring to the structure in the above-mentioned example, we note that Company (A) owns all companies (B) and (C) directly indirectly by 100% meaning that it is entitled to submit a consolidated zakat declaration and consolidated accounts. Company (A) owns 99% of all companies, company (D) owns 1% of Company (C), and Company (C) owns 1% of both companies (B) and (D), does the principle of submitting a consolidated zakat declaration apply to companies (A) ) to (D)? Referring to the structure in the above-mentioned example, we note that Company (A) owns all other companies directly or indirectly by 100%, meaning that it is entitled to submit a consolidated zakat declaration and consolidated accounts. Company A Company A Company B Company B Company C Company D Company C Example (8): The companies (A) and (B) below are Saudi companies registered with ZATCA and they submit zakat declarations annually, and upon reviewing their ownership; it was noted that the ownership structure is as follows: Person (A) owns 30% of each company, Person (B) owns 40% of each company and Person (C) owns 30% of each company. Does the principle of consolidated declaration apply to companies (A) and (B)? Referring to the structure in the above-mentioned example, we note that the two companies are owned by the same persons; thus, either of them is entitled to submit a consolidated zakat declaration and consolidated accounts. Person B Person A Person C Company A Company B In the event that the conditions of the consolidated zakat declaration apply to a group of companies and such companies want to be accounted for according to the consolidated accounts and a consolidated zakat declaration, the holding company shall access its account on the portal and apply for registering a holding company, and then the information of all subsidiaries is included. After submission, ZATCA shall review the above-mentioned data, noting that all companies (holding and subsidiaries) shall register on the ZATCA's website and update their data correctly. Upon approval by ZATCA, the holding company will be able to submit the consolidated declaration for the entire group, noting that any new subsidiaries can be added to the group by following the same steps mentioned above.10 The figure below is a summary of the steps to be followed to submit the consolidated zakat declaration: 5. Determining the zakat base for the taxpayer who maintains commercial books The zakat base for the taxpayer who maintains commercial books is determined according to the ZATCA's method of levying zakat, which was explained in Section II of this Manual11 . According to this method, the taxpayer's internal sources of funds are added and the amounts taken from its external sources of funds in deducted financing (additions), then the non-zakatable assets (deductions) are deducted 12 Review the group companies' data Ensuring that all group companies are registered on the portal Submitting a group registration request on the portal Submitting a consolidated declaration for the group Submitting information declaration for subsidiaries Approval ZATCA. 11 ) Article (4), determination of the additions and deductions to the zakat base, Executive Regulations. 12 ) Article (5), determination of the zakat Base for those who maintain commercial books - method of sources of funds, Executive Regulations.