The Tax Authority of Saudi Arabia issued the Regulations for implementation of Zakat under Ministerial Resolution No. 2082 of 28 February 2017 (01/06/1438H) on 9 March 2017, The regulations applies to all commercial activities established for profit and are carried out by Saudi resident and Gulf Cooperation Council nationals.
The new regulations replace all previous directives, resolutions, instructions and circulars issued by the General Authority for Zakat and Tax (GAZT) of Saudi Arabia. According to the regulations the zakat base has to be higher than the adjusted profit for the year and will be charged at the rate of 2.5% of the assessable funds irrespective of whether the zakat payer follows the Hijri or Gregorian calendar as their fiscal year. Gain and loss from revaluation of financial securities at their market values also be considered for the calculation of Zakat. According to the new rules Government’s share in a commercial venture would also be subject to zakat.
Companies will be able to submit a consolidated Zakat return if they are owned by the same continuing shareholders. The statutory deposit made with banks and insurance companies with the Saudi Arabian Monetary Agency and others are not deductible for zakat purposes. On the other hand, Salaries and benefits of proprietors or partners registered with the General Organization for Social Insurance are deductible for Zakat purposes. According to the new rules, Financing lease arrangements will be considered as a purchase by the lessee, via a loan from the lessor and will be considered the owner of the assets and therefore meet the criteria for the deduction of the leased assets from the zakat base. The Bad debts written off resulting from the transactions with related parties will not be allowable as expense. Also, Goods or services supplied by related parties at prices higher than the market prices will not be considered as allowable cost.
The General Authority for Zakat and Tax has been authorized to start an arbitrary assessment of a company which fails to file its zakat return within 120 days from the end of the financial year.
The new regulations are effective from 28 February 2017.