how zakat is calculated in saudi arabia varies according to the type of wealth or activity and the method of calculating the Zakat base.
Therefore, it is important to identify the funds subject to Zakat and know the elements that are added or deducted before applying the Zakat rate.
The Zakat, Tax and Customs Authority clarifies the rules and treatments related to Zakat, and also provides an electronic calculator for individuals that helps calculate the due Zakat according to different types of wealth.
In today’s article presented by CLA, we review with you everything you want to know about how zakat is calculated in saudi arabia, in addition to the services we provide to you.
how zakat is calculated in saudi arabia
how zakat is calculated in saudi arabia depends on first determining the Zakat base, then applying the prescribed rate to it.
As for the Zakat of companies and taxpayers subject to the provisions of Zakat collection, the method of arriving at the base differs according to the nature of the taxpayer, the financial data, and the applicable Zakat treatments.
In general, Zakat is at a rate of 2.5% of the Zakat base for the Hijri year. If the fiscal year differs from the Hijri year, the rate may be calculated according to the actual number of days in the fiscal year.
What is meant by the Zakat base?
The Zakat base is the basis on which Zakat is calculated after carrying out the necessary Zakat treatments on the elements of the taxpayer’s funds and financial data.
The Executive Regulations for Zakat Collection issued in 1445 AH stipulate a number of rules related to determining the Zakat base, including the development of a minimum and maximum for the base in some cases. The regulations apply to fiscal years beginning on January 1, 2024, and thereafter, in accordance with the controls specified therein.
How to calculate Zakat for individuals
For individuals, the calculation method differs according to the type of wealth on which Zakat is due. Zakatable funds may include cash, gold, silver, shares, and others in accordance with the relevant Sharia provisions.
The Zakat, Tax and Customs Authority provides the “Zakati” calculator service for individuals in two versions: a simplified calculator for calculating Zakat on cash, and an extended calculator for entering different types of Zakatable funds, then obtaining the amount of Zakat due.
Example of calculating Zakat on wealth
If the wealth subject to Zakat reaches SAR 100,000, and the conditions for the obligation of Zakat are met, it can be calculated as follows: 100,000 × 2.5% = SAR 2,500. That is, the amount of Zakat is SAR 2,500.
The conditions for the obligation of Zakat and the provisions related to each type of wealth must be taken into account before performing the calculation.
How to calculate Zakat for companies and establishments
Calculating Zakat for companies differs from merely multiplying profits by 2.5%; the Zakat base is first determined in accordance with the rules and treatments specified in the Executive Regulations.
The Zakat, Tax and Customs Authority clarifies that calculating Zakat for companies can be based on the methodology of determining the sources and uses of funds, with certain elements added to the base and others deducted in accordance with the applicable provisions.
Examples of elements that may enter into the treatment include capital, profits, reserves, and some liabilities, while some non-Zakatable assets and investments Zakatable in other establishments may be deducted in accordance with the controls.
Steps for calculating Zakat for establishments
The calculation process can be simplified into a set of basic steps:
- Determining the financial data: Collecting the statements and accounting data related to the fiscal year.
- Determining the Zakatable elements: Identifying the elements that enter into the base in accordance with the applicable rules.
- Determining the deducted elements: Excluding the elements that the rules permit to be deducted.
- Calculating the Zakat base: Arriving at the base after making the necessary additions, deductions, and treatments.
- Applying the Zakat rate: Multiplying the base by the Zakat rate appropriate for the financial period.
- Reviewing the declaration: Ensuring the accuracy of the data and documents before submitting the declaration and paying the due amounts.
What is the Zakat rate in Saudi Arabia?
The basic rate for Zakat on the base for the Hijri year is 2.5%. If the taxpayer’s fiscal year differs from the Hijri year, the Zakat, Tax and Customs Authority clarifies that the rate can be calculated according to the actual number of days in the fiscal year, using the equation: Zakat rate = 2.5% × actual number of days ÷ 354 days.
For example, if the fiscal year is 365 days, the rate used for some elements of the base becomes: 2.5% × 365 ÷ 354 = approximately 2.58%.
There are special details and treatments for adjusted net profit and other elements of the base, so this rate should not be applied to all cases in the abstract.
The difference between calculating Zakat for individuals and companies
There are important differences between calculating Zakat for individuals and calculating Zakat for establishments.
An individual can use the “Zakati” calculator to enter various Zakatable funds and calculate the due amount, while establishments subject to Zakat collection rely on their financial data and the rules for determining the base and the treatments that apply to them.
Therefore, accounting profit does not necessarily represent the Zakat base, and in all cases, a company’s Zakat cannot be calculated by merely multiplying net profit by 2.5%.
Does Zakat differ according to the fiscal year?
Yes, the method of applying the Zakat rate may differ when the taxpayer’s fiscal year does not match the Hijri year.
The Authority clarifies that calculating Zakat in this case takes into account the actual number of days in the fiscal year, with special treatment for adjusted net profit in accordance with the specified rules.
Zakat calculator in Saudi Arabia
The Zakat, Tax and Customs Authority provides an electronic service called the “Zakati” calculator for individuals, which is dedicated to helping individuals calculate the due Zakat.
Through it, one can choose the simplified or extended calculator and enter data related to Zakatable funds, then the amount of Zakat due appears. The Authority provides the service free of charge.
The importance of accuracy in calculating Zakat
Accuracy in calculating Zakat helps determine the due amount correctly and avoid errors resulting from entering non-subject elements or omitting elements that should be included.
For establishments, the importance of reviewing financial data and Zakat treatments increases, especially with the existence of detailed rules for the Zakat base.
The Executive Regulations for Zakat Collection also include detailed provisions regarding Zakat treatments, the declaration, Zakat assessment, and objections thereto.
Zakat services for Saudi companies from CLA
CLA provides specialized Zakat services that help companies understand their obligations, prepare calculations and declarations in accordance with the regulations in force in the Kingdom, which enhances the accuracy of Zakat calculation, limits errors, and supports compliance.
Frequently Asked Questions about how zakat is calculated in saudi arabia
What is the Zakat rate in Saudi Arabia?
The basic Zakat rate is 2.5% of the Zakat base for the Hijri year, with a different method for calculating the rate when the fiscal year differs from the Hijri year.
How do I calculate Zakat on SAR 100,000?
If SAR 100,000 is the wealth subject to Zakat and the conditions for its obligation are met, then the calculation is: 100,000 × 2.5% = SAR 2,500.
Is a company’s Zakat calculated on net profit?
Not necessarily; company Zakat depends on the Zakat base after applying the prescribed treatments, additions, and deductions. Therefore, the base may differ from the accounting net profit.
Does the Zakat rate differ if the year is Gregorian?
The rate applied to the elements of the base may differ according to the number of days in the fiscal year when it differs from the Hijri year, in accordance with the equation determined by the Authority.
Is there an official calculator for calculating Zakat?
Yes, the Zakat, Tax and Customs Authority provides the “Zakati” calculator for individuals to calculate Zakat according to different types of wealth.
With this, we have reached the end of the article, during which a range of information about how zakat is calculated in saudi arabia has been reviewed. You can contact us at CLA to obtain a range of our services.
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