In Saudi Arabia, Zakat, or the obligatory charity, is a fundamental financial and religious responsibility governed by Islamic law. For businesses, especially the accounting sector, knowledge about Zakat rules is essential to avoid penalties while ensuring compliance with what is used.
As this is supervised by the Zakat, Tax, and Customs Authority (ZATCA), Zakat is calculated and paid by companies yearly according to guidelines prescribed by the Authority. Read on to find out everything you need to know about Zakat for businesses, the process of calculating Zakat, and the role of the sscoksa.com accounting and best accountants in Saudi Arabia in this regard.
1. Zakat in Saudi Arabia
Definition and Purpose
Zakat is almsgiving as one of Islam’s Five Pillars, and it is meant to purify wealth in order to help the less fortunate. Zakat is mandated by law for individual Muslims and Muslim-owned businesses in Saudi Arabia, and it is an important fiscal responsibility for businesses that wish to operate lawfully in the kingdom.
Who is Liable to Pay Zakat?
In Saudi Arabia, Zakat applies to:
● Sole proprietorships: Saudi or Gulf Cooperation Council (GCC) nationals owned
● Corporate entities: With full Saudi or GCC ownership
● Joint ventures and partnerships: Zakat on qualifying assets is proportionally liable for Saudi or GCC ownership.
Zakat is not payable by non-Muslim businesses, which are subject to a separate corporate income tax.
2. Calculating Zakat: Key Considerations
Accounting Period
Zakat is divided into annual years, of which the Hijri (Islamic) year is usually used as the basis on which to judge. If a company’s accounting period is consistent with the Gregorian calendar year, it may choose to calculate Zakat on that basis.
Basis of Calculation
The Zakat rate is fixed at 2.5 percent of the Zakat base, calculated on net assets which meet certain conditions. This base primarily consists of:
● Current assets: Cash, receivables, inventory and other liquid or easily liquidated assets
● Investment assets: Marketable securities, such as stocks, shares, etc.
Exemptions and Exclusions
Certain assets may be exempt or deducted from the Zakat base, including:
● Fixed assets: They are not liquid property, plant, equipment and machinery.
● Non-Zakatable debts: The amounts payable to creditors or loaned out but not expected to be recovered during the accounting year.
The best accountants in Saudi Arabia know comprehensive Zakat rules and use them to deduct and extract Zakat that is exempted appropriately.
3. Accounting Services in Zakat Compliance
Detailed Record-Keeping
Accurate Zakat calculations depend on keeping complete records of all assets, liabilities, income, and expenses, so accounting services are necessary. ZATCA mandates transparency, and as such, detailed financial documentation is critical, and ZATCA may conduct audits to verify Zakat compliance.
Liabilities Professional Assessment
It is a complex process to assess the company’s Zakatable assets versus liabilities, as many of the assets are not liquid, have different valuations, and have exemptions. They make sure that only qualifying assets are taken into account in the Zakat base so that businesses do not overpay.
Deductions and Adjustments Guidance
One of the core services a provider gives is accounting firms, namely providing precise deductions such as trade payables and outstanding debts. They also correctly calculate deductions which follow exactly ZATCA regulations and actual Zakat liability without any miscalculations that may lead to penalties.
4. Filing and Payment Procedures
Filing Requirements
Zakat returns must be submitted to ZATCA within 120 days of the end of the financial year. For efficient filing, accounting services assist companies by:
– Preparation of Zakat declaration form
– Organising all supporting documentation into compliance.
– Zakat base adjustments advising on Zakat liability
Payment Options
The Zakat due is payable either in full or on an approved instalment plan if the total liability is large. It’s important to pay on time to avoid late fees or penalties by ZATCA.
Conclusion
So, zakat is a compulsory obligation for Saudi businesses, and ZATCA carries out the implementation with detailed instructions regarding its calculation, filing, and payment. Thus, hiring the best accountants in Saudi Arabia to expertly and error-free navigate the importance of financial Zakat duty businesses who want to avoid making any mistake would benefit them.
