The following words and terms - wherever they appear in this Regulation - shall have the meanings specified next to each of them unless the context requires otherwise:
Panel: The General Panel for Zakat and Income.
Minister: The Minister of Finance.
Governor: The Governor of the General Panel for Zakat and Income.
Regulation: The Implementing Regulation for Zakat Collection.
Taxpayer: A natural or legal person engaged in an activity subject to Zakat collection under the Regulation, whether an individual establishment or a company, or someone who conducts the activity under a license issued by a competent authority.
Zakat Year: The financial year of the taxpayer, whether it is Hijri or Gregorian, short or long, at the beginning or end of the activity.
Admission: A statement submitted by the taxpayer in accordance with the forms of the Panel, which includes the financial items related to the Zakat calculation, and shows the Zakat due according to what is stated in the Regulation.
Assessment: A decision by the Panel indicating its acceptance of the admission or its amendment, based on the available information and the procedures in place at the Panel.
Activity: An endeavor aimed at achieving profit, whether it is a commercial, service, industrial, or other type of activity.
Kingdom: The territory of the Kingdom of Saudi Arabia, which includes: the land, territorial waters, seabed, layers beneath the soil, natural resources, airspace, and its rights in the areas divided between it and neighboring countries, as well as maritime and semi-maritime areas located outside the territorial waters of the Kingdom, over which it exercises sovereignty and rights of sovereignty, or jurisdiction in accordance with its system and international law.
Resident: A natural or legal person who meets the residency conditions specified in Article (3) of the Regulation.
Commercial Books: The commercial books maintained by the taxpayer, which record all commercial transactions, described by the Commercial Books System issued by Royal Decree No. (M/61) dated 17/12/1409 H and its Implementing Regulation, and any amendments that may occur to them.
Concept of Residence:
1- An individual is considered a resident in the Kingdom during the Zakat year if one of the following two conditions is met:
A- He must have a permanent residence in the Kingdom and must reside there for no less than thirty (30) days in the Zakat year, whether continuous or intermittent.
B- He must reside in the Kingdom for no less than one hundred eighty-three (183) days in the Zakat year, whether continuous or intermittent.
For the purposes of this paragraph; residence in the Kingdom for part of a day is considered a full day's residence, and a person's presence in the Kingdom for a day or part of it while in transit between two points outside the Kingdom is not considered residence within the Kingdom.
2- A non-individual taxpayer is considered a resident in the Kingdom during the Zakat year if one of the following two conditions is met:
A- It must be established in accordance with the applicable regulations in the Kingdom.
B- Its main management must be located in the Kingdom.
The zakat base for the taxpayer who maintains commercial books consists of all their assets subject to zakat collection, including the following:
1- The capital, as well as any increase therein if the source of the increase is one of the elements of equity or if it is financing for any of the items deducted from the zakat base.
2- Revenues and advance payments made to the taxpayer at the beginning or end of the zakat year, whichever is lower.
3- Debts owed by the taxpayer classified as long-term and other components of the base, such as: government financing, commercial financing, creditors, promissory notes, overdraft accounts, and loans from owners or partners (including their current accounts), provided that the following is observed:
A- If the debts owed by the taxpayer or other sources of financing have a duration of three hundred and fifty-four (354) days or more overlapping during the zakat year and the following year, they are added to the zakat base in relation to each year based on the number of days in each zakat year.
B- The zakat year for debts does not cease with their renewal or rescheduling with the same creditor, or by replacing these debts with other debts or sources of financing that finance what these debts were financing.
C- The total amount added from what is mentioned in this paragraph shall not exceed the total amount deducted from the base in accordance with Article (5) of the regulation.
4- The balance at the beginning of the zakat year from reserves carried forward from previous years.
5- The balance of retained earnings from previous years.
6- Provisions at the beginning of the zakat year after deducting what has been used from them during the zakat year.
7- The net profit of the zakat year adjusted for zakat collection purposes in accordance with the provisions of the regulation.
8- Profits under distribution, except for profits announced for distribution that their owners have not claimed; provided that they are deposited in a special account that does not allow the taxpayer to act upon it.
9- The change in fair value calculated in accordance with paragraph (6) of Article (6) of the regulation.
10- Any item from the liabilities and equity that has financed an item deducted from the zakat base.
It is deducted from the zakat base for the taxpayer who maintains commercial books the following items:
1- Net fixed assets and similar items, including - but not limited to - the following:
A. Fixed assets acquired for the purpose of using them in the taxpayer's activity, at the book value shown in the financial statements.
B. Payments for the purchase of fixed assets.
C. Spare parts and materials not intended for sale.
D. Assets financed for the lessee in financial lease contracts in Build-Operate-Transfer (BOT) projects, or Build-Own-Operate (BOO) projects, or Build-Own-Operate-Transfer (BOOT) projects, and similar arrangements.
E. Employee housing owned by the taxpayer.
F. Housing loans paid to employees through employee housing support programs, if their contracts indicate that the financing was through a benevolent loan, or deferred sale without the company earning any financial profits, or fees exceeding the principal amount of the financing.
2- Capital constructions under execution that are created for use in the activity and not for the purpose of selling them, taking into account what is stated in paragraph (9) of this article.
3- Intangible assets recorded in the taxpayer's commercial books that are generated internally or purchased without the intention of trading them.
4- Investments in an establishment within the Kingdom not for trading, provided that such establishment is registered with the authority and is subject to zakat collection under the regulation. Leased assets in the commercial books of the lessor are not considered an investment deductible from the zakat base, regardless of their classification in the financial statements, nor are loans receivable or supporting or additional financing or similar provided to the invested establishment considered an investment deductible from the zakat base.
5- Investments in an establishment outside the Kingdom not for trading, provided that the taxpayer pays zakat on these investments to the authority based on a certificate prepared in accordance with the provisions of the regulation and approved by a licensed accountant in the Kingdom, with the minimum zakat base for these investments being the taxpayer's share of the net accounting profit stated in the financial statements of these investments, whether the profit is distributed or not. If the taxpayer fails to calculate and pay zakat accordingly, these investments will not be deducted from the zakat base.
6- Net establishment expenses and pre-operating expenses and similar capital expenses.
7- Net loss for the zakat year adjusted for zakat purposes in accordance with the provisions of the regulation.
8- Adjusted carried forward loss for zakat collection purposes in accordance with the provisions of the regulation after adding the provisions that previously reduced the loss in the year of its formation or the carried forward losses according to the taxpayer's commercial books, whichever is less.
9- The value of properties under development intended for sale, which are classified as non-current assets in the financial statements, and are intended to be sold after completion of their development, unless they are offered for sale in their current condition or the total sales and advance payments received from customers exceed twenty-five percent (25%) of their value shown in the financial statements for the zakat year in question, and the authority has the right to review and amend this percentage according to market conditions.
10- The statutory deposit for insurance and reinsurance companies.
11- Agricultural inputs (stored) purchased for use in production for the taxpayer engaged in agricultural activity when accounting for zakat on commercial goods.
The zakat base is calculated by adding the items mentioned in Article (4) of the Regulation, deducting the items mentioned in Article (5) of the Regulation, in accordance with the following controls:
1- The zakat base for the taxpayer must not be less than the adjusted net profit for the purposes of zakat collection according to the provisions of the Regulation.
2- The taxpayer is liable for zakat for the entire zakat year in which one of the partners passed away or waived their share and others entered in their place, whether they are heirs or others, if the taxpayer continues their activity.
3- The individual establishment is liable for the zakat year during which ownership was fully transferred to other owners proportionately according to the financial period as stated in Article (14) of the Regulation, whether the transfer of ownership was by sale or waiver or similar means, and the zakat due on the individual establishment for the years prior to this zakat year is not affected, and the proportional accounting does not apply to any form of transformation of the taxpayer from one legal form to another except as mentioned in this paragraph.
4- No offset or settlement shall be made between the creditors' balances of the owners or partners (including their current accounts) and the debts owed by other owners or partners (including their current accounts).
5- The taxpayer engaged in agricultural activities subject to zakat on fruits and grains, and another activity subject to the provisions of the Regulation, must provide the authority with separate and independent accounts for their activity subject to the provisions of the Regulation.
6- For zakat purposes, the results of re-evaluation according to the fair value shown in the financial statements are taken into account.
7- Regarding employee housing support programs, the price of the housing unit borne by the employee must not exceed its actual cost to the taxpayer, and the employee should not bear any additional amounts for the loan, including cases where the contract is terminated before its completion.
8- For zakat purposes, the taxpayer may treat the bonds and securities issued by them as capital, regardless of their classification in their financial statements, and in this case, those bonds and securities are deducted from the zakat base for the investors in them if they are not for trading, and the issuing taxpayer may not depart from this treatment during the maturity period of the bonds and securities.
The governor may propose specific rules for calculating the zakat bases, registration, or submitting admissions for certain activities. These rules are approved by a decision from the Minister and are communicated to the obligated individuals practicing these activities and the supervisory authorities over them.