General Manual of Zakat

Zakat Base Items (Additions): The additions to the zakat base for the taxpayer who maintains commercial books consist of internal sources of funds (equity and the like) and external sources of funds that have financed deductible assets13 Reasons for the addition to the zakat base: ● Matching the deductible assets with the taken liabilities. ● Reaching the zakat assets financed from internal sources of funds. Example (9): The following statements for a company as at the end of the fiscal year: Statement of Financial Position Assets Liabilities and Equity SAR SAR Current Assets Current Liabilities Long-Term Liabilities Long-Term Assets (Property and Equipment) Equity Total Total 13 ) Article (4): Determination of the Zakat base for those who maintain commercial books - funds that constitute the zakat base, Executive Regulations. (A) Calculating ZB Item SAR Long-Term Liabilities Equity Minus: Long-term assets Zakat base Reasons for the addition to the zakat base: Reaching the zakat assets financed from internal sources of funds. Matching the deductible assets with the taken liabilities. 5.1.1 Concepts related to Additions The ZATCA's method for calculating the zakat base is based on listing all internal sources of funds and what financed deductible assets from external sources of funds. Zakat Base Building: When building ZB, the obligations of the taxpayer (external sources of funding) shall be added initially, assuming its priority in financing the deducted items before the internal sources of funding, according to the following order: External Sources of Funds (Maximum Deductible Assets): ● Obligations that are known to have financed deductible assets, such as: (A debts for the purchase of a fixed asset). ● Long-term liabilities (considering the term of the debt), such as: (Loans with a term of more than 354 days). Example (10): The following statements for a company as at the end of the fiscal year: Statement of Financial Position Assets Liabilities and Equity SAR SAR Current Assets Current Liabilities Long-Term Liabilities Long-Term Assets (Property and Equipment) Equity Total Total Calculation of the zakat base with the indirect method: The external sources of financing shall be added to ZB first to meet them with deductions, not exceeding the total value of the deductions, and then the internal sources of financing shall be added, and thus the long-term liabilities in the example above were added to ZB within the limits of the deductible assets, and then the equity is added. Internal sources of funds: ● Property rights, such as: (capital reserves and retained earnings). ● Retained provisions after deducting the used provisions during the year, such as: (End of service provision after deducting the used provision during the year). Item SAR Long-Term Liabilities (Not Exceeding the Deductions) Equity Minus long-term assets Total 5.1.2 Items added to the zakat base: Below are examples of items added to the zakat base, with some controls mentioned in the next section, and some examples for further clarification: Group Item Amount Equity and the like Working Capital at Start of Year xx Increase in capital during the year xx Reserves carried over from previous years xx Retained earnings from previous years xx Year adjusted net profit for the purposes of levying zakat xx Change in fair value resulting from the revaluation xx Provisions Opening provisions after deducting the used provisions during the year xx Creditors xx Notes payable xx Loans and the like + the current installment of the loan xx Partner or Owner Loans xx Amounts withheld from contractors (quality performance assurance) xx Amounts payable to related parties xx Profits in distribution xx