General Manual of Zakat

Controls for Deduction from the Zakat Base 1. Fixed assets and the like shall be deducted at the net value recorded in the accounts, provided that they are used in the taxpayer's activity. The items similar to assets include: ● Spare parts and materials not intended for sale. ● Payments to purchase fixed assets. ● The assets financing by the lessee in financial leases in build-operate-transfer (BOT), build-own-operate (BOO) or build-own-operate-transfer (BOOT) projects, and other similar forms. Example (18): A company enters into contract with the General Authority of Civil Aviation to establish an airport in the Al-Jawf Province, and the contract is in the form of build-own-operate-transfer (BOOT), so that the company builds and owns the airport for (10) ten years, during which the airport is operated for the company, then transfers the ownership at the end of the contract term (ten years) to the General Authority of Civil Aviation, and the company spends in the first year SAR 24,000,000 to build the project. The company has the right to deduct the project cost SAR (24,000,000) from the zakat base for this year. Example (19): A company enters into contract with the Electricity Company to establish an power plant in Taif Province, and the contract is in the form of build-operate-transfer (BOT), so that the company builds and operates the power plant for it, then transfers the ownership at the end of the contract term (ten years) to the Electricity Company, and the company spends in the first year SAR 50,000,000 on the project. The company has the right to deduct the amount spent on the project being SAR (50,000,000) from the zakat base for this year. Example (20): A company entered into contract with the Development Authority to build a hotel in Riyadh, and the contract is in the form of build-own-operate (BOO), so that the company builds, owns and operates the hotel for it, and the company spends SAR 100,000,000 to build the hotel. The company has the right to deduct the hotel establishment cost SAR (100,000,000) from the zakat base for this year. 2. Capital constructions and projects in progress that are established for the purpose of being used in the activity not for the purpose of selling shall be deducted from the zakat base. 3. Long-term non-trading investments in establishments in the KSA shall be deducted if they are shares of companies subject to the provisions of levying zakat, i.e., they are zakat assets with the investees. Investments in establishments outside the KSA shall be deducted as follows: ● Investments shall be in shares of non-trading companies. ● The taxpayer shall pay the zakat on these investments to ZATCA according to an approved certificate from a chartered accountant licensed in the KSA. ● The minimum zakat base for these investments shall be the taxpayer›s share of their net profit contained in the financial statements. * Employee Shares Ownership Program: The employee share program that appears within ownership rights, and is considered a reduction of ownership rights under the name “Treasury Shares” that are allocated to the company’s employees, and are added in the negative, when they meet the following conditions: a. The approval of the Extraordinary Assembly on the purchase of shares and its purpose b. That the company›s policy stipulates a share option program, or a list of rewards for employees approved by the Ministry of Human Resources, or any legal document that proves that.