What is Zakat Accounting?
Zakat accounting is the recognition, measurement, and disclosure of the zakat charge imposed on Saudi and GCC-owned shareholders of Saudi companies. Zakat is calculated on the zakat base under ZATCA’s Zakat Implementing Regulations and is presented in the financial statements.
How It Works
- Determine the zakat base at year end after the prescribed additions and deductions.
- Apply the 2.5% rate to compute the zakat charge.
- Recognise the zakat expense in profit or loss and the zakat liability on the balance sheet.
- Settle the liability by paying ZATCA within the statutory deadline.
- Disclose the zakat policy, charge, and key reconciling items in the notes.
Saudi Context
Listed Saudi companies disclose zakat charges separately from corporate income tax charges. Mixed-ownership companies allocate zakat to Saudi and GCC shareholders and income tax to foreign shareholders, both filed with ZATCA on the annual return.
Example
A Saudi-owned company has a zakat base of SAR 40M. Annual zakat = 40M × 2.5% = SAR 1M. The entry is debit zakat expense SAR 1M, credit zakat payable SAR 1M, settled when paid to ZATCA.