What is Business Zakat?
Business zakat is the Sharia-mandated annual obligation, calculated at 2.5% of the zakat base, due from Saudi-owned and GCC-owned businesses operating in Saudi Arabia, administered and collected by ZATCA.
How It Works
- Applies to Saudi and GCC-owned entities (foreign-owned shares pay corporate income tax instead).
- Zakat base = adjusted shareholders’ equity + long-term debt – long-term assets (simplified).
- Rate: 2.5% applied to the zakat base.
- Annual zakat return filed with ZATCA within 120 days of year-end.
Saudi Context
ZATCA administers zakat under detailed implementing regulations covering exemptions, base adjustments, and special sectors. Mixed-ownership Saudi/foreign joint ventures split into a zakat portion (Saudi/GCC share) and a corporate income tax portion (foreign share), with each pro-rata share filed separately on the same annual return.
Example
A Saudi-owned LLC has shareholders’ equity of SAR 10,000,000, long-term debt SAR 2,000,000, long-term assets SAR 3,000,000. Zakat base = 10,000,000 + 2,000,000 – 3,000,000 = SAR 9,000,000. Annual zakat = 9,000,000 × 2.5% = SAR 225,000.