Zakat in Saudi Arabia
Confused about Zakat rules and calculations? Gryffin Capitalist can simplify your filing, optimize payments, and ensure full compliance with Saudi regulations.
Rooted in centuries-old Islamic law, ‘Zakat in Saudi Arabia’ has evolved into a modern taxation system. At present, it is more than a spiritual duty that reinforces the country’s commitment to modernisation without compromising religious foundations.The Islamic Zakat system in Saudi Arabia aims to promote social equity by redistributing wealth from the financially able to those in need. It is intended to support specific groups, including orphans, poor, and needy.
In this article, we will explore everything you need to know about zakat in Saudi Arabia. The article covers all the nitty gritty details, from understanding the applicable zakat rates and who is required to pay, to the detailed process of calculating zakat. We will also outline the step-by-step payment procedure, and provide a checklist of essential documents businesses need to file zakat.
Zakat Rate in Saudi Arabia
Zakat, which is one of the five pillars of Islam, remains a voluntary act. For all the eligible Saudi Arabia businesses, it is a financial obligation to pay Zakat. Wondering how the Zakat tax system affects your business in Saudi Arabia? Well, let us help you understand it! Zakat in Saudi Arabia is set at a rate of 2.5%. It is applied to a business’ ‘Zakat base’, which is the net value of assets exceeding the Islamic threshold (also called nisab).
If you are planning to establish a business in Saudi Arabia, it is essential to know how Zakat and corporate taxes in Saudi Arabia are applied depending on the company's ownership structure. The table below summarises the applicable rates and responsibilities:
| Type of Business Ownership | Applicable Zakat Tax |
|---|---|
| 100% Saudi‑owned companies or Gulf Cooperation Council (GCC) businesses | Subject to Zakat at a rate of 2.5% on the Zakat base. |
| 100% foreign‑owned companies | Not subject to Saudi Arabia Zakat; instead pays corporate income tax (CIT) at 20% |
| Mixed ownership structure | The Saudi share is subject to 2.5% Zakat, while the foreign share pays 20% CI |
Who Should Pay Zakat in Saudi Arabia?
According to Islam, Zakat is a form of charity and every Muslim who meets specific conditions related to wealth and ownership should pay it. However, not everyone is obligated to pay zakat in Saudi Arabia. For instance, people with disabilities or whose income and assets are below the nisab threshold. To understand who should pay zakat in Saudi Arabia, it is important to know the specific criteria that determine eligibility. Read it below:
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Only Muslims are obligated to pay zakat, as it is considered as a religious duty under Islam.
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Saudi Arabia businesses and individuals having wealth above the Nisab threshold must pay zakat.
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Zakat is required from those who have reached adulthood and are mentally capable of managing their wealth.
Assets and Income Exempt from Zakat in Saudi Arabia
Not all assets or income are subject to Islamic zakat. According to the Islamic law, specific assets and types of income are exempt because they do not meet the criteria for zakatable wealth. Here’s a list of commonly exempted assets and income types:
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Unpaid salary or any sort of income not yet received or owned
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Personal items like your home, clothes, and vehicles for personal use
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Debts owed to you that are uncertain to be collected
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Gifts and inheritances before they reach the nisab
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Business fixed assets such as machinery and buildings
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Assets used for daily living or work, not held for trade or investment
How is Zakat Calculated in Saudi Arabia?
Understanding how Zakat is calculated in Saudi Arabia is essential for anyone living, working, or doing business in the Kingdom. Zakat in Saudi Arabia is calculated based on Islamic principles. The process of calculating Zakat involves determining the Nisab threshold and applying the 2.5 per cent rate to eligible wealth. The method of calculation depends on whether the Zakat is for Individuals (personal zakat) or for businesses.
To clarify the differences between how is zakat calculated in Saudi Arabia for individuals and businesses, the table below provides a side-by-side comparison of key aspects:
| Aspect | Zakat for Individuals | Zakat for Companies |
|---|---|---|
| Zakat Rate in Saudi Arabia | 2.5 per cent | 2.5 per cent |
| Nisab Threshold | It becomes obligatory for you to pay Zakat in Saudi Arabia if your wealth exceeds the nisab, which is the value of 85g gold or 595g silver. | There is no nisab threshold for companies. Zakat is calculated based on their financial structure and net worth. |
| Regulating Body | Zakat for individuals is self-managed and based on personal accountability in accordance with the Islamic teachings. | Zakat for business owners is regulated and enforced by the ZATCA in Saudi Arabia. |
| Applicable To | Applies to every Muslim adult whose wealth meets or exceeds the nisab threshold and has been held for a year. | Applies to Saudi-owned or majority-Saudi-shareholding companies operating within the country. |
| Calculation Basis | Zakat in Saudi Arabia is calculated on the total of all zakatable assets after deducting immediate liabilities or debts. | In this case, Zakat is calculated based on either the net worth or working capital method. |
| Zakatable Assets | This mainly includes cash, gold, silver, trade goods, investments, and savings that have been owned for one lunar year. | This may include capital, retained earnings, reserves, and certain liabilities under the working capital method. |
| Exempt Assets | Personal belongings such as homes, cars, clothing, and items for personal use are not subject to zakat in Saudi Arabia. | Fixed assets like buildings, equipment, and non-zakatable investments are excluded from the zakat base. |
| Filing Requirement | Individuals are not required to submit any official filings. However, the government encourages people to calculate and pay responsibly. | It is mandatory for companies to file zakat returns annually through ZATCA’s official platform. |
| Payment Method | In case of individuals, payment can be made directly to eligible recipients or through licensed zakat organisations and platforms. | For companies, payment is made to ZATCA, which then disburses funds in accordance with national zakat distribution policies. |
What is ZAKATY in Saudi Arabia?
The importance of Zakat tax influences financial reporting standards for Saudi Arabia businesses. The country operates under a dual‑taxation framework, where Zakat is levied alongside conventional corporate taxes. It is administered by the Zakat, Tax, and Customs Authority (ZATCA) as a tool for social welfare. In 2018, ZATCA then launched a government-backed digital platform called ZAKATY to further promote transparency for individuals. This platform allows individuals (and not companies) to calculate and pay Zakat online.
Benefits of Zakat in Saudi Arabia
The zakat system in Saudi Arabia aims to ensure that benefits are maximised on both an individual and national level. It brings spiritual growth and social harmony, helping to bridge the gap between rich and poor.
Some of the key benefits of zakat in Saudi Arabia include:
What Documents Are Needed to File Zakat for Businesses in Saudi Arabia?
Step-by-Step Process of Paying Zakat in Saudi Arabia
The process of paying zakat in Saudi Arabia differs slightly for individuals and businesses. The core principles, such as the 2.5% rate and Nisab threshold, remain the same, while the method of calculation and payment varies. Below is a step-by-step outline for both individuals and businesses to help ensure zakat is calculated and paid correctly.
Step 1: Prepare financial statements of your company detailing all the zakatable assets and liabilities. Sounds complex? Do not worry! We can help you organise and structure your financial data in line with the local regulations.
Step 2: Determine your Saudi Arabia zakat base following ZATCA’s guidelines.
Step 3: Calculate 2.5 per cent of the zakat base.
Step 4: File zakat returns annually via the ZATCA portal. Gryffin Capitalist assists in preparing and reviewing your zakat return for accurate digital submission.
Step 5: Pay the zakat amount to ZATCA by the deadline.
Step 6: Maintain detailed records of calculations, filings, and payments. Experts at Gryffin Capitalist help you set up efficient recordkeeping systems for audits and future filings.
Step 1: Calculate all zakatable assets held for at least one lunar year. Gryffin Capitalist helps you identify and assess all zakatable assets, including cash, gold, and investments.
Step 2: Check if total wealth meets or exceeds the Nisab (85g gold or 595g silver).
Step 3: Calculate 2.5% of your total zakatable wealth.
Step 4: Identify eligible recipients of zakat in Saudi Arabia, as per the Islamic guidelines. You can leave that to us! We can connect you with trusted channels for zakat distribution.
Step 5: Distribute zakat directly or through authorised charities.Gryffin Capitalist advises on efficient and compliant methods of zakat disbursement.
Step 6: Keep records of your zakat calculations and payments.
We understand that for business owners, especially entrepreneurs new to the Saudi market, navigating the Zakat filing process whether through ZATCA’s main portal or related digital platforms can still be complex. That’s where Gryffin Capitalist comes in! We assist businesses in accurately calculating their Zakat base, preparing required financial documentation, and ensuring full compliance with ZATCA regulations.
Gryffin Capitalist can guide you through every step of your zakat filing process. From organising financial records to preparing and submitting your zakat returns, we take care of it all. Our team ensures to maintain full compliance with ZATCA regulations while saving you time and effort.
Simplify Your Saudi Zakat Filing with Gryffin Capitalist
Struggling to keep up with taxation in Saudi Arabia? We are here to help you. Gryffin Capitalist makes paying zakat easy and stress-free. We understand Saudi Arabia’s zakat rules and help you follow them correctly. Whether you are an individual or a business, we make sure your zakat in Saudi Arabia is calculated accurately and paid on time. Our team of professionals help guide you step-by-step, help organise your documents, and submit your zakat return to the authorities. We also offer advice to optimise your zakat payments and avoid mistakes. With Gryffin Capitalist, you get trusted support, clear advice, and peace of mind. Choose us to handle your zakat in Saudi Arabia the right way!
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Frequently Asked Questions (FAQs)
No, zakat in Saudi Arabia is only obligatory for Muslims. Zakat is primarily enforced on Saudi nationals and companies with Saudi ownership. Non-Saudi residents are generally subject to income or corporate tax, not zakat.
No, zakat is not treated as a deductible expense in the accounting sense. However, it is a compulsory obligation that must be paid annually for eligible entities.
ZATCA may impose fines, penalties, or legal actions. Non-compliance can also lead to delayed renewals of licenses, visas, and other government-related services.
Yes, if you hold shares for trading, zakat in Saudi Arabia is due on their full market value. If held long-term for dividends, zakat is due on profits and zakatable assets only.
Yes, Saudi Arabia offers government-approved platforms like the ‘Ehsan’ portal and charitable foundations authorised to collect and distribute zakat on your behalf.
