Zakat Transactions in the Construction&RET Sectors

Practical Examples Balance Sheet (Statement of Financial Position) as of 31/12/2019 Assets SAR SAR Assets Current Assets Cash in hand and at banks Trade and other receivables Financial investments at fair value through profit or loss Prepayments and other receivables Total current assets Non-current assets Property, plant and equipment Real estate projects under development Advances to subsidiaries Investments in subsidiaries Real estate investments Other long-term assets Total assets Liabilities and Shareholders’ Equity Current liabilities SAR SAR Leases due for operating leases Payables Accrued expenses and other payables Current portion of the term loan Total current liabilities Non-current assets Provision for end-of-service benefits Term loans Sukuk Total liabilities Equity Capital Statutory reserve Retained earnings Total equity Total liabilities and equity Income Statement for the Period from 1/1/2019 to 31/12/2019 Item SAR Revenues Cost of revenue Gross profit Selling and marketing expenses Administrative and general expenses The Company’s share in the income of subsidiaries Other loss (net) Income from operations Financing charges (net) Profit before Zakat Zakat Net profit for the year Description Opening Balance Provided During the Year Utilized During the Year Closing Balance SAR SAR SAR SAR Provision for end-of- service benefits Total Movement of Provisions Zakat Calculation Item Amount Adjustment to activity result SAR Net profit before Zakat Add: Provision for end-of-service provided during the year Total adjustment to activity result Additions to the Base Shareholders’ equity SAR Capital Statutory reserve Retained earnings Dividends Total Liabilities on the Zakat payer Term loans Advance payments Provision for end-of-service benefits (opening balance minus the amount utilized during the year) Total external sources of funds subject to Zakat Total additions to the base Deduction from Zakat Base SAR Property, plant and equipment Real estate projects under development Investments in local subsidiaries after excluding shares in profit and loss Real Estate investments Total deductible assets Zakat base without the adjusted profit for the year Zakat at 2.578% of the Zakat base without the adjusted profit Adjusted profit Zakat at 2.5% of the adjusted profit Total Zakat 7. Request for Ruling If you are not aware of how to apply zakat to a certain activity or transaction you carry out, or plan to carry out, after referring to the respective statutory provisions and Guideline, you can submit an application to ZATCA for issuing a Ruling decision according to the Implementing Regulations for Zakat Collection issued by the Ministerial Resolution No. (2216) dated 7 Rajab 1440H. 8. Contact us For more information about any transaction that is subject to Zakat collection, please visit ZATCA's website zatca.gov.sa or call the number 19993. 9. Frequently Asked Questions (FAQ) 1. Is it permissible for an entity to deduct the employees’ share in regular pension funds, such as retirement pensions, social insurance, or saving funds, from the Zakat base? The employees’ share in such funds may not be deducted from the Zakat base. 2. What are the expenses that may be deducted from the Zakat base? All ordinary and necessary expenses required for the business activity, whether paid or due, are deductible to calculate the net result of the business activity, provided that the following guidelines are met: ● They must be actual expenses evidenced by supporting documents or other proof that enables the Authority to verify their validity, even if they relate to previous years. ● They must correspond to the business activity and not be related to personal expenses or other activities. ● They must not be of a capital nature. If an expense of a capital nature is included, the result of the business activity will be adjusted accordingly and the expense will be added to the fixed assets and depreciated in accordance with statutory ratios. 3. Is it permissible for an entity to deduct bad debts from the Zakat base? What are the guide- lines for that? Bad debts are considered expenses that may be deducted according to the following guidelines: ● They must have been previously reported as revenue for the entity in the year they became due. ● Bad debts should have arisen from engagement in business activities, provided that: A. The entity provides a certificate from a certified public accountant confirming that bad debts have been written off from the books by a competent officer’s decision. B. The debts written off should not be owed by parties related to the Zakat payer. C. The Zakat payer must report the debts that have been written off as revenue once the debts are recovered. 4. Is it permissible for the owner of the entity to deduct his salary and allowances from the Zakat base? The salaries and allowances of the business owner, whether a sole proprietorship, a capital company, or a company of persons, as well as the remuneration paid to the chairman of the board of directors, his deputy, and board members, shall be considered expenses that may be deducted, provided that: ● The salaries and allowances of the owner are registered with social insurance. ● The remuneration should not exceed what is paid to independent persons. 5. How is the Zakat calculated if the fiscal year is longer than the Hijri year (354 days)? Zakat is calculated based on the actual number of days in the year by applying two and a half percent (2.5%) to the number of days in the Hijri year (354 days), multiplied by the number of actual days in the zakatable year. The adjusted net profit shall be subject to Zakat at two and a half percent (2.5%) for the year. Scan this code to view the last version and all published documents Or visit the website zatca.gov.sa