Modification of the Activity Result for Zakat Purposes for Zakat Payers holding Legal Accounts

Contents

1. Introduction

1. 1.1. About Zakat

2. 1.2. Collection of Zakat

3. 1.3. Zakat Collection in the Kingdom of Saudi Arabia

4. 1.4. The Zakat, Tax and Customs Authority (ZATCA)

5. 1.5. ZATCA’s Tasks

6. 1.6. About the Manual on the modification of the activity's result

2. Modification of Activity Result

1. 2.1. Introduction

2. 2.2. Definitions and Relevant Terms

3. 2.3. Modification of the activity’s result

4. 2.4. Deductible Expenses

1. 2.4.1. Ordinary and Necessary Expenses for Activity

2. 2.4.2. Salaries and Allowances of the Owner registered with GOSI and Remuneration of Board Members

3. 2.4.3. Bad Debts

4. 2.4.4. Expenses of Assets Depreciation and Amortization

5. 2.4.5. Donations

6. 2.4.6. Created during the zakat year from the unearned premium reserve and the reserve for current risk in insurance and/or reinsurance companies

7. 2.4.7. School Tuitions Paid for Children of the Zakat Payer’s Employees

5. 2.5. Non-deductible Expenses

1. 2.5.1. Expenses and costs not related to activity

2. 2.5.2. Expenses that cannot be documentary supported by the zakat payer

3. 2.5.3. Due or Paid Zakat and Tax

4. 2.5.4. Employee Share in Pension Programs and Provident Funds

5. 2.5.5. Provisions and Reserves created during the zakat year

6. 2.5.6. Increment in the price of materials or services provided by related parties compared to the prices utilized between independent parties

7. 2.5.7. Import Differentials

6. 2.6. Other considerations for non-exclusive items affecting the activity result and its zakat treatment

1. 2.6.1. Difference in salaries and wages between those registered in books and declared before GOSI

2. 2.6.2. Change in exchange rate of financial statements’ items that are recognized at income statement (profits or losses statement)

3. 2.6.3. Utilized amount of the provisions previously added back to adjusted profit subject to zakat in the year of its creation

4. 2.6.4. Company’s share in business results of investee company via equity method

5. 2.6.5. Profits or losses generated from selling investments

6. 2.6.6. Income from dividends from investee companies

7. 2.6.7. Profits or losses arising from remeasurement of Employees’ benefits plan

8. 2.6.8. Value-added tax

9. 2.6.9. Real Estate Transaction Tax

10. 2.6.10. Excise Tax

7. 2.7. Practical Examples

3. Appendix: Frequently asked questions