Wednesday, 7 June 2017

Saudi Arabia: Minister of Finance issues new zakat regulations

Saudi Arabia’s Minister of Finance issued a resolution on 28 February 2017 that contains new zakat regulations. The resolution, which is effective as from the date of issuance, consolidates the current practices of the General Authority for Zakat and Tax (GAZT) relating to the collection of zakat and replaces all previous pronouncements on the topic.
The regulations represent an important step in achieving Saudi Arabia’s “Vision 2030,” whose goals include the expansion of the zakat tax base and reforms to the tax structure.
Zakat (an annual levy under Islamic law) will apply to all activities carried out for the purposes of earning a profit, including commercial, investment, industrial and financial activities, and the provision of services. Zakat payers include Saudi resident companies (on the shareholdings of Saudi and Gulf Cooperation Council nationals, as well as any shares of Saudi government entities and agencies).
Zakat will be assessed at the applicable rate regardless of whether the zakat payer uses the Hijri or Gregorian calendar as its fiscal year. There are detailed rules addressing items that may be deducted from the zakat base, including the following:

  • Fixed assets may be deducted only if they are owned by the zakat payer;
  • Leasing transactions will be considered a sale by the lessor to the lessee, with the latter deemed to be the owner and, therefore, entitled to claim depreciation and a deduction of assets; and
  • Salaries and bonuses paid to the president, vice president and members of the board of directors of a Saudi company who also are shareholders may be deducted, provided the recipients are registered with the General Organization for Social Insurance.

Holding companies and their wholly owned subsidiaries must submit consolidated accounts and a consolidated zakat return, subject to specified conditions.
The GAZT is granted enhanced powers under the new resolution, and there is no time limit for the GAZT to make an assessment or an adjustment; the authorities can make an arbitrary assessment if the zakat payer fails to submit a return. Zakat payers can object to an assessment by filing an appeal within 60 days of receipt of the assessment.
An overpayment of zakat will automatically be carried forward to the next year unless the zakat payer requests a refund. The GAZT has 30 days from the date of a request to make the refund.

Source: Deloitte