Zakat Transactions in the Construction&RET Sectors

Purpose of the Guideline The guideline provides guidance and basic information on the requirements of Zakat collection, the procedures of its application, and the obligations of persons subject to Zakat (Zakat payers) in the construction and Real Estate Sectors. This guideline sheds light and provides guidelines on the practical application of Zakat collection in Saudi Arabia. For instructions on any specific transaction, you can visit the official website of the Authority (zatca.gov.sa), which offers a wide range of tools and information tailored to assist Zakat payers, including visual guidance materials, all relevant data, and FAQs. 2. Zakat Concepts, Terminology and Calculation Methods The Regulations The implementing regulations for Zakat collection issued under Ministerial Resolution No. (2216), dated 7/7/1440 H. A. Collection of Zakat: The State shall calculate the Zakat of funds subject to Zakat, collect such funds from the Zakat payers subject to it, and transfer them to the Social Security Agency for disbursement to the beneficiaries of social security. Zakat collection is the state’s duty. The Prophet (peace and blessings of Allah be upon him) used to send messengers every year to collect Zakat from all Muslims. At this time, it is carried out by the Zakat, Tax and Customs Authority on behalf of the state, in accordance with the relevant laws, regulations and rules. The Authority has issued regulations and rules governing Zakat collection and has provided high-quality services to the Zakat payers to help them fulfill their duties. B. Zakat payer: A natural or legal person who carries out an activity (business) subject to the collection of Zakat under the Regulations, whether it is a sole proprietorship, a company, or whoever carries out business activity under a license issued by a competent authority. C. Zakat payer not subject to Collocetion of Zakat: A Zakat payer that has acquired a certificate not to be subject to the collection of Zakat, in accordance with the Authority’s procedures. D. Resident: A natural or legal person to whom the residency requirements specified in Article (3) of the Regulations apply. E. Non-resident: Any person who does not qualify as a resident. F. The Zakat year: The fiscal year of the Zakat payer, whether Hijri or Gregorian, short or long, at the beginning or end of activity. Example (1): A company was incorporated on 10/12/2019 (the date of issuance of the Commercial Registration). According to the Articles of Association, the first financial year of the company starts from the date of issuance of the Commercial Registration and ends on 31/12/2019. Hence, the first financial year of the company shall be from 10/12/2019 to 31/12/2019. G. Calculating the completion of the Hijri year (Al-Hawl): Twelve lunar months (354) days have passed since attaining the zakatable fund (Nisab) Number of Hijri year days (354) X The number of actual days of the Zakat year for the Zakat payer Example (2): The financial year of the company (S) for grains starts on 1/1/2019 and ends on 31/12/2019 in the same year (Gregorian year). The Zakat base of the company for the year was SAR 2,500,000, including an adjusted profit for Zakat of SAR 900,000. The Zakat is calculated according to the Zakat base as follows: Number of Hijri days X Number of actual days of the Zakat year for the Zakat payer X Base value excluding adjusted profit X X Zakat Profit X X Total H. Business activities: Real estate activities, commodity trading, service provision, securities, financing and insurance activities, all banking activities, and others. Sharia evidence has established the obligation of Zakat on various forms of commercial activities. The Shariah imposes Zakat on all forms of commercial activities according to the hadith of Jabir bin Samurah (may Allah be pleased with him) who narrated: “The Messenger of Allah (peace be upon him) ordered us to pay Zakat against what we prepare for sale.”