General Manual of Zakat

Beginning of the fiscal year: The taxpayer's first zakat year begins as from the issue date of the commercial register, obtaining the necessary licenses or the capital deposit date, whichever is earlier, unless the taxpayer specifies another date for the beginning of its activity based on documentary evidence. Most of the taxpayers determine the beginning of the company‘s first fiscal year as from the issue date of the commercial register. The beginning of the taxpayer‘s first fiscal year is specified in the company‘s Memorandum of Association, which is a supporting document recognized by ZATCA17. Example (30): The partners in Al Sahara Company deposited the company‘s capital on AD 20/5/2019, and then the company was incorporated on AD 2019/07/ 14, as the company‘s Memorandum of Association stipulated that the first fiscal year starts from the issue date of the commercial register, which was set on AD 2019/08/25. When does the company‘s first zakat year start? The company's first zakat year starts as from 20/5/2019/ AD, which is the date of depositing the capital with the bank; because it is earlier. 17 Article (13), Zakat Year, Executive Regulations. 8.2 Zakat Percentage: Zakat shall be two and a half percent (2.5%) of the zakat base for the Hijri year. In the event that the taxpayer's fiscal year differs from the Hijri year, whose number of days is often (354 days)18; the calculation of zakat is based on the number of actual days of the taxpayer as follows: Number of actual days = 354 days Based on the foregoing, if the taxpayer calculates zakat on the basis of the Gregorian year or if the fiscal period subject to zakat is a long or short period at the beginning of the activity; the above- mentioned percentage is calculated for all components of the zakat base except for the adjusted net profit. As the zakat is calculated on the adjusted profit at two and a half percent (2.5%). Example (31): A company, whose fiscal year begins on 1/7/2019/ AD and ends on 31/12/2020/ AD, has calculated its adjusted profit, amounting to three million Saudi riyals, and the zakat base was calculated without the adjusted profit, amounting to six million Saudi riyals, so what is the amount of zakat calculated on it? Referring to the above-mentioned data, we note that the company‘s fiscal period is a long period; thus, the percentage shall be calculated in days as follows: Number of Days of the Year 549 days Zakat percentage = (2.5% + 354) x 549 = 3.8771% Zakat due on the components of the zakat base except for the adjusted profit = 6 million x 3.8771% = SAR 232,627. Zakat due on profit = 3 million x 2.5% = SAR 75,000. The zakat due amounted to 232,627 + 75000= SAR 307.627 The short fiscal period at the end of the company's activity may not be subject to zakat if the number of days of the period is less than three hundred and fifty-four (354) days. 18 Article (14), Zakat Percentage, Executive Regulations. 8.3 Consolidated Accounts for Zakat Purposes: The holding company and its wholly owned subsidiaries, or companies owned by the same owners, may submit a consolidated zakat declaration according to consolidated financial statements and pay the zakat due, provided that the subsidiaries shall submit an information declaration to ZATCA in accordance with its independent financial statements19. When the holding company and its subsidiaries obtain approval from ZATCA to submit a consolidated declaration, after requesting that from ZATCA; the company shall issue financial statements showing the full results of the group‘s business, and on the basis of which the taxpayer shall prepare the declaration in accordance with the controls mentioned in item 5 of this Manual.