General Manual of Zakat

Non-deductible Expenses: The following expenses may not be deducted to determine the activity result for zakat purposes: ● Expenses and costs not related to the taxpayer's activity, including the following: ● Expenses of a capital nature. ● Personal expenses. ● Salaries, wages and the like, paid to the owner, partner other than as registered with the Social Insurance. ● Expenses not supported by documents or other evidence acceptable to ZATCA. ● Zakat or tax due except for the value-added tax incurred by the taxpayer. ● Share of employees of pension funds and provident funds. ● Provisions and reserves accrual during the year. Import differences and how to address them: During the inspection stage, the Authority verifies the value of the import based on the customs declaration and compares the same with the value declared by the taxpayer. This will be done after deducting any imports added to the fixed assets during the Zakat year and any other imports identified by the Authority based on available information. The taxpayer will then be asked to explain any differences that arise. Some of these differences could be attributed to various factors, including differences in timing and registration, currency evaluation, and import through other companies or related companies. In order to resolve these discrepancies, supporting documents will be required for study and verification purposes. In the event of import differences not supported by documentation, the difference is handled as follows: ● If the value of the import declared by the taxpayer is greater than its declared value in the customs declaration, the difference must be added in full to the net profit. ● If the value of the import declared by the taxpayer is lower than its declared value in the customs declaration, a profit for this difference shall be calculated in accordance with the procedures established by the Authority. The profit calculated will not be less than the ratio of the total profit of the declaration to the revenues, and the result will be adjusted accordingly. Example A: The import value of one of the companies as at 31 December 2019 amounted to SAR 80,000,000 according to the company›s books, whereas the import, as per the customs declaration, was SAR 100,000,000, assuming that the percentage established by the Authority not less than the ratio of the total profit of the declaration to the revenues of the activity is 15%. How to address the difference? ● Imports on the items of the financial position or the items of the income statement: 1. In the previous example, the taxpayer matched the balance of the last period of the inventory in the declaration with the financial statements, and it was found that a portion of his purchases is added to the production stages, which appear within the inventory items in the statement of financial position; therefore, no import differences are calculated (with the right of the Authority to request the necessary samples to verify the validity of these differences).