What is Zakat Calculation?
Zakat is a religious wealth contribution applied in Saudi Arabia at 2.5% per lunar year on the zakat base of Saudi-owned and GCC-owned shares of companies. ZATCA administers the calculation and collection. The zakat base is broadly equity plus certain adjustments minus certain deductions.
How It Works
- Start from total equity (paid-up capital, reserves, retained earnings) as at year-end.
- Add adjustments for long-term provisions, certain loans, and prior-year zakat.
- Deduct fixed assets, investments in subsidiaries, statutory deposits, and accumulated losses.
- Apply the 2.5% rate (or pro rata for Saudi/GCC ownership in mixed entities) to the resulting zakat base.
Saudi Context
ZATCA collects zakat from Saudi and GCC nationals’ share in companies, and corporate income tax from foreign shareholders’ share. Filing is due within 120 days of the financial year-end, and a zakat certificate is required for government tenders and to renew commercial registrations.
Example
A 100% Saudi-owned LLC has SAR 10 million zakat base after adjustments. Zakat for the year is SAR 250,000 (2.5%), paid to ZATCA within 120 days of year-end together with the zakat return.