Zakat Transactions in the Construction&RET Sectors

Guidelines for Deduction from the Zakat Base Fixed assets and equivalent shall be deducted at net value recognized in the accounts provided that they are used in the Zakat payer’s activity. The assets include the following: ● Spare parts and materials not intended for sale. ● Payments for the purchase of fixed assets. ● Assets financed for the lessee in the financing lease contracts in Build-Operate- Transfer (BOT), Build-Own-Operate (BOO), Build-Own-Operate-Transfer Contracts (BOOT) contracts and other similar form of contracts. Example (10): A company contracted with the General Authority of Civil Aviation to construct an airport in Al-Jouf. The contract was in the form of Build-Own-Operate-Transfer Contracts (BOOT) contracts, so that the company builds and owns the airport for a period of ten years during which the airport is operated in favor of the company. At the end of the contract term (ten years) the ownership will be transferred to the General Authority of Civil Aviation. The company spent in the first year SAR 24,000,000 to build the project. The company has the right to deduct the cost of the project (SAR 24,000,000) from the Zakat base for this year. Example (11): A company contracted with the Electricity Company to establish a power station in the Taif region. The contract was in the form of construct-Build-Operate and Transfer (BOT). In the first year, the company spent SAR 50,000,000 on the project. The company has the right to deduct what it spent on the project (SAR 50,000,000) from the Zakat base for this year. Example (12): A company contracted with the Development Authority to build a hotel in Riyadh. The contract was in the form of Build-Own and Operate (BOO), so that the company builds, owns and operates the hotel in its favor. The company has spent SR 100,000,000 to build the hotel. 1. The company has the right to deduct the cost of establishing the hotel (SAR 100,000,000) from the Zakat base for this year 2. Capital constructions and projects underway that are established for use in the business activity and not for sale shall be deducted from the Zakat base. 3. Long-term non-trading investments in establishments within the Kingdom shall be deducted if they are represented in the shares of companies subject to the provisions of Zakat collect, i.e. they represent Zakat assets with the investees. Investments in establishments outside the Kingdom are deducted as follows: ● Investments shall be in non-trading companies’ shares ● The Zakat payer shall pay the Zakat of these investments to the Authority according as cer- tified by a public accountant registered in the Kingdom. ● The minimum Zakat base for these investments shall equal, at least, Zakat payer’s share of accounting profit reported in the financial statements. Employee Stock Ownership Program: The employee stock ownership program that appears within equity, and is a reduction of equity under the name of “treasury shares” allocated to the company’s employees, is added negatively when the following conditions are met: A. Approval of the extraordinary general assembly for the share purchase process and its purpose. B. The company’s policy stipulates a stock option program, or the employee bonus regulations approved by the Ministry of Human Resources, or any regulatory document proving this. 4. The net loss carried forward according to the Authority’s link is after adding the provisions that previously reduced the loss in the year of their formation, or the losses carried forward according to the taxpayer’s commercial books, whichever is less.