Zakat Transactions in the Construction&RET Sectors

Expenses that may be deducted Item Amount Net book profit or book loss for the year XXX Add: Non-deductible expenses XXX Net profit or loss adjusted for the purpose of Zakat XXX Item Amount Normal and necessary expenses necessary for the business The expense shall be actual and supported by documents and evidence accepted by the Authority, and verifiable, even if it relates to previous years. The expenses shall be related to the business of the Zakat payer and may not relate to personal expenses or other activities not related to the Zakat payer. They should not be of a capital nature. If capital expenditure is included in the expenses, it shall be adjusted as a result of the business activity and included in the fixed assets and depreciated within the depreciation of the asset. Salaries and allowances of the owner or the partner Expenses related to the difference in salaries and wages that exceed the amount recorded in the certificate issued by the General Organization for Social Insurance (GOSI) may be deducted, provided that such expenses are supported by documentary evidence. may be deducted within the limits of the remuneration paid to independent parties. Remuneration paid to the Chairman, Deputy Chairman and members of the Board from the owners or partners Bad debt Should have been previously reported as revenue in the year the revenue had been derived. The Zakat payer shall provide a certificate from a chartered public accountant licensed in the Kingdom confirming that cancellation of such obligations has been made by a decision of the competent authority upon request by the Authority. Obligations may not be due from related parties. The Zakat payer shall report the debts written off as revenue where such debts are recovered. Annual installment depreciation on fixed assets The assets shall be owned. The assets are intended for use in the business, as determined by the Zakat payer’s business books. The installment depreciation shall be reasonable and not exaggerated Donations Donations must be paid to those authorized to receive donations inside the Kingdom and supported by relevant documents. Provision for unearned premium and the existing risk reserve in the insurance companies (and /or) reinsurance companies (for further details refer to the insurance business manual) Shall be returned to Zakat base during the following year. Shall be determined in accordance with the professional standards followed for this type of business, and in accordance with the prevailing regulations, bylaws and rules related to this type of business School expenses paid to the children of the employees Should have paid to an educational institution licensed in the Kingdom. Should be explicitly stated in the contract of employment or company’s by-laws. Such expenses shall be capable of being evidenced by supporting payment documents acceptable to the Authority. Normal and Necessary Expenses for the Business ● The expense shall be actual and supported by documents and evidence accepted by the Authority, and verifiable, even if it relates to previous years. ● The expenses shall be related to the business of the Zakat payer and may not be related to personal expenses or other activities not related to the Zakat payer. ● They should not be of a capital nature. If capital expenditure is included in the expenses, it shall be adjusted as part of the business activity, included in the fixed assets, and depreciated within the depreciation of the asset. Bad Debt ● Bad debt should have been previously reported as revenue in the year the revenue was delivered. ● The Zakat payer shall provide a certificate from a chartered public accountant licensed in the Kingdom, confirming that the cancellation of such obligations has been made by a decision of the competent authority upon request by the Authority. ● The obligations should not be owed to parties related to the Zakat payer ● The Zakat payer shall report the debts written off as revenue if such debts are recovered. Annual Installment Depreciation on Fixed Assets ● The assets must be owned. ● The assets are intended for use in the business, as determined by the Zakat payer’s business books. ● The installment depreciation shall be reasonable and not exaggerated. Donations ● Must be paid to those authorized to receive donations inside the Kingdom and supported by relevant documents Guidelines of Some Expenses That May Be Deducted