Zakat for Saudi companies is administered by ZATCA. This guide covers who pays Zakat vs CIT, the Zakat base and rate, adjustments, Hijri year, filing, and the Zakat clearance certificate. See Saudi tax, VAT, WHT, and compliance calendar.
Who Pays Zakat vs Corporate Income Tax
Saudi and GCC nationals (individuals and entities wholly owned by them): subject to Zakat, not CIT. Foreign investors: subject to CIT (20% on the foreign share) on the same entity. Mixed ownership: Zakat on the Saudi/GCC share and CIT on the foreign share; the company files both and the liability is proportional. The entity’s legal form and ownership determine the split.
Zakat vs CIT in Practice
Zakat is a religious levy on net assets (Zakat base under ZATCA rules). CIT is a tax on taxable income (revenue minus allowable deductions). A Saudi-owned company pays Zakat only. A foreign-owned Saudi company pays CIT only. A 50/50 Saudi–foreign company pays Zakat on 50% of the Zakat base and CIT on 50% of the taxable income. The two calculations are separate; ensure your financials and ZATCA submissions support both.
Zakat Base Calculation (Net Assets)
The Zakat base is calculated under ZATCA’s net assets method: eligible assets minus eligible liabilities, with prescribed adjustments (e.g. fixed assets, inventory, receivables, payables, provisions). The result is the amount subject to the Zakat rate. The base is not the same as accounting profit; it is derived from the balance sheet and ZATCA’s rules. Trading companies and holding companies have specific treatment; see ZATCA guidance and your advisor.
Zakat Rate
The effective Zakat rate for companies is 2.578% of the Zakat base (equivalent to 2.5% of the base with adjustments as per the Zakat Regulation). Apply this to the Saudi/GCC ownership proportion of the base for mixed companies. Payment is due with the Zakat return by the filing deadline.
Common Adjustments and Deductions
ZATCA’s Zakat Regulation specifies which assets and liabilities are included and how they are valued. Common adjustments include: treatment of fixed assets (e.g. depreciation), inventory valuation, receivables (bad debt), certain investments, and liabilities. Deductions and exclusions are defined; the accounting balance sheet is the starting point but must be reconciled to the Zakat base. Keep records to support the return.
Zakat Year (Hijri Calendar)
Zakat is assessed by Hijri year for companies that use the Hijri year as the Zakat year. Some companies use the Gregorian year; ZATCA allows both in specified cases. The closing balance sheet date and the Zakat base are determined as of the end of the Zakat year. Ensure your financial closing and ZATCA filing are aligned with the correct year end.
Filing Deadline and ZATCA Return
The Zakat return is filed via the ZATCA portal. The deadline is typically within 120 days of the end of the Zakat year (confirm current rules). Payment is due with the return. Late filing and late payment attract penalties. Advance Zakat payments may be made during the year to reduce the final payment.
Zakat Clearance Certificate
A Zakat clearance certificate from ZATCA confirms that Zakat (and often CIT/VAT) obligations are satisfied. It is frequently required for CR renewal, government contracts, and banking. Obtain the certificate after filing and payment; apply via the ZATCA portal. Without it, renewals and tenders can be blocked.
Penalties for Late Payment
Late filing and late payment of Zakat attract penalties under ZATCA’s penalty schedule (e.g. percentage of tax due, fixed amounts). Interest may apply on unpaid amounts. See ZATCA penalties for the full list. File and pay on time to avoid penalties and to obtain the clearance certificate when needed.