June 06, 2025

What is zakat tax in Saudi Arabia?

Zakat being one of the five pillars of Islam holds a significant worth in Islamic societies. For Muslims Zakat is not merely a legal obligation but a tool for promoting social justice and economic equity. In Saudi Arabia Zakat is taken more formally than many other Islamic countries. It is a legal part of the KSA tax system and mandatory for all obliged businesses and individuals to pay. Zakat in Saudi Arabia is both a spiritual duty and a legal regulation that fosters economic justice, social equity, and national development. With the current evolution and technological integration, the zakat system is headed to become even more impactful in addressing the Kingdom’s socio-economic challenges while remaining true to its Islamic roots. This article further delves deep into the actual understanding of Zakat Tax, businesses who are liable to pay zakat, legal procedure of zakat filing and challenges and benefits that come along.

Understanding Legal Framework of Zakat Tax in Saudi Arabia

Zakat is derived from the Islamic teachings present in Quran and Hadith; it is a spiritual action that is intended to redistribute wealth within Islamic community to reduce the social inequalities. It is mentioned in the holy book of Islam, Quran that Muslims are mandatorily obliged to pay Zakat. Looking back into the history, from the time of early caliphates, Islamic governments always emphasized on the collection and distribution of Zakat. Zakat system in Muslims is mainly used to support the poor, orphans, and widows, while stimulating economic participation.

In the present times, Zakat is Saudi Arabia is governed by Islamic jurisprudence (fiqh) and is codified within the country’s legal and financial systems. The Zakat, Tax and Customs Authority (ZATCA) is responsible for legally collecting and enforcing Zakat in the region. ZATCA follows strict guidelines to make sure that Zakat is collected as per Sharia Law and imposes fines and penalties in case of non-compliance as a punishment. In KSA, Zakat tax is generally imposed on Saudi and GCC businesses while international businesses are required to pay corporate tax. Therefore, KSA follows a dual tax system, Zakat Tax for Muslims and Corporate Tax for foreign entities. This depicts the Kingdom’s devotion to merging religious principles into national fiscal policies.

Who Is Liable to Pay Zakat?

Zakat applies to:

Muslim Individuals holding wealth more than Nisab for a Lunar year.
Businesses that are possessed by Saudi Nationals, either in partnerships or single owned enterprises are required to pay Zakat tax on their net assets.
Shareholders that gain any profit from Saudi Companies must also pay Zakat.
Companies owned by both GCC and non-GCC residents pay Zakat tax for only Saudi owned percentage and income tax for non-Saudi owned percentage.

Zakat does not apply to:

Businesses dealing in hydrocarbon and oil sector pay taxes much higher than Zakat.
Non-Saudi Investors and Shareholders engaged in the Saudi stock market, capital attained from speculative trading in listed company shares are not subject to Zakat; however, they are taxable under income tax laws.
Companies operating in Natural Gas investments are also taxed under standard income Tax rules instead of Zakat

Zakat Calculation, Registration and Filing

Zakat is calculated at a general rate of 2.5% of Zakatable assets. Assets that zakat is levied on are:

Cash and bank balances
Trade and inventory goods
Accounts receivable (if collectable)
Investments in shares and securities
Gold, silver, and other precious metals
Agricultural products and livestock

Personal assets and Real estate assets that are not used for trade and in personal use are exempted from Zakat.

The Process of Zakat Calculation Includes:

Finding Zakatable base by comparing assets values against the nisab threshold
Excluding non Zakatable Assets like Debts, fixed assets, and non-liquid investments
On the Remaining Zakatable amount a 2.5% rate is calculated

Such as, if a company has total Zakatable assets of SAR 10 million and SAR 2 million are deducted in liabilities, the remaining SAR 8 million is the amount on which Zakat Tax is Calculated, which is going to be, 2.5% of 8,000,000= 200,000 (Zakat tax)

Zakat Tax Registration and Filing Process:

To Register for Zakat, visit the ZATCA online Portal https://zatca.gov.sa
Create an account and choose your business type and register through GOV.SA
Now log in to the portal and fill out the registration form
Upload the supporting Documents and submit the application form
Get your Zakat Filing Number that will be used for future Zakat Payment

Pay the Zakat Tax amount before the deadline, they are typically filed 120 days after the end of each financial year.

Social and Economic Benefits of Zakat Tax

Zakat highly contributes to the social and economic benefits, such as:

Zakat fills the wealth gap by reducing poverty through distributing Zakat amount among poor, needy and widows
As per Islamic values it purifies the wealth and soul of the givers and promotes ethical financial behavior
It supports many social welfare programs such as education, health and housing sector
It boosts the non-profitable sectors like religious institutes, charitable organizations, medical treatment programs etc.
It mitigates the crimes caused by economic disparity and contributes to social stability by facilitating low-income families.

Digital Transformation of Zakat in Saudi Arabia

Saudi Arabia is digitally reshaping the Zakat filing and compliance system, over the time KSA has modernized the Zakat administration through:

Data analytics and AI tools to detect any under reporting
Digital Identity verification tools by linking national IDs with Zakat Obligations
Streamline filing and payment process through single unified platforms
Online portals for real time filing and communication
Verified mobile applications to track zakat process and latest changes
Block chain to foster transparency in Zakat distribution

These digital tools highly ease the Zakat collection process and motivate the individuals to pay Zakat effortlessly.

Zakat Taxation Services in Saudi Arabia

Despite of the fact that Saudi Government has significantly enhanced Zakat tax process efficiency. Yet, for many non-technical businesses and due to less knowledge of Zakat, oftentimes entities still struggle in filing Zakat tax in Saudi Arabia. Miscalculations, late filings and improper documentations results in non-compliance which leads to hefty fines for up to SAR 10,000. Therefore, under no circumstances should businesses neglect their Zakat obligations. Accounting companies in KSA play a pivotal role in further streamlining the Zakat Tax process. They not just have the most advanced tools but the best skilled accountants on board that helps in thorough Zakat compliance.

SSCOKSA Zakat Tax services help the businesses facing challenges in accurately filling and calculating Zakat Tax along with other tax requirements. We are recognized as one of the top-notch accounting companies in Saudi Arabia that offer you high end Zakat tax support with cutting edge tools and innovative solutions. We make sure that businesses are always aligned with Saudi Tax Laws while maintaining precise and updated financial records. Our services help businesses achieve complete Zakat tax compliance to prevent any legal hurdle. Get in touch to offload your Zakat tax burden and focus on growing your business without any stress.

Blog