That gap between profit and the zakat base surprises a lot of owners and finance managers. Zakat calculation in Saudi Arabia works from the balance sheet, not the income statement, and the Zakat Implementing Regulations that apply from fiscal years starting 1 January 2024 changed several treatments. This guide covers how the base is built, how the rate is applied, who pays zakat and who pays income tax, and how to file inside the 120-day window.
If you want a second pair of eyes on your base before it reaches the portal, Accounting Services KSA can review your zakat for companies KSA workpaper and flag problems early.
What zakat means for a company in Saudi Arabia
Zakat is a religious obligation that the Kingdom collects through ZATCA from Saudi and GCC-owned businesses. In day-to-day compliance, it sits next to VAT and corporate income tax on the calendar, which is why many finance teams file it under Islamic tax in Saudi Arabia.
The point most owners miss is that zakat is not a profit tax. A company with a thin profit can owe zakat on a large base, while a highly profitable company can owe less than expected once fixed assets are deducted. Provisioning 2.5% of net income is the most common budgeting mistake, and it usually leaves the books short.
Zakat also carries weight beyond the payment itself. A valid zakat certificate is needed for government tenders, bank facilities, and commercial registration renewals. A missed filing can stall a contract you have already won.
Who pays zakat and who pays income tax in KSA
Ownership decides which regime applies to each riyal of your business. The split is simple in principle but easy to get wrong in the return.
Saudi and GCC owned shares
Zakat applies to the share owned by Saudi nationals, GCC nationals, and entities wholly owned by them. A fully Saudi-owned LLC pays zakat on its whole base.
Foreign-owned shares
The foreign share pays 20% corporate income tax on its portion of taxable profit. This is a separate calculation that follows income statement rules.
Mixed ownership companies
Take a company owned 60% by Saudi partners and 40% by a foreign investor. It files for both: zakat on the Saudi share of the base, and income tax on the foreign share of profit. A wrong ownership percentage in the return is one of the quickest ways to draw a ZATCA query, so tie the figures to the commercial registration and the latest shareholder records.
How the zakat base is built under ZATCA Zakat KSA rules
Under ZATCA Zakat KSA rules, the base starts from equity and long-term funding, then removes assets that are not zakatable. The structure is the same for every company, but the numbers and the conditions differ.
Items usually added to the base:
- Opening equity, including capital, reserves and retained earnings
- Long-term loans and financing used in the business
- Opening provisions, with some exceptions
- Adjusted net profit for the year
Items usually deducted from the base:
- Net book value of fixed assets and intangibles
- Long-term investments that are not zakatable, where the conditions are met
- Accumulated losses carried forward
- Certain government receivables and shareholder debit balances, where the bylaws allow it
Many of these items have conditions attached. ZATCA reads the substance of a balance, not the label in your ledger, so a worksheet that copies totals straight from the trial balance often fails review.
What changed under the new bylaws
The new regulations apply to fiscal years starting on or after 1 January 2024. They introduced a matching approach for assets and liabilities, clearer rules on shareholder loans, and updated minimum and maximum limits on the base. ZATCA also amended the rules on residency, exemptions and group filing in June 2025.
The minimum limit is linked to adjusted net profit. A company that reduces its base heavily through deductions still pays zakat at least on that profit figure. The maximum limit sets a ceiling so the base cannot grow without bound.
A worked example of zakat calculation Saudi Arabia businesses can follow
Take a Saudi-owned company with a 31 December 2025 year-end. The figures are simplified to show the logic, not to replace your own accounts.
| Item | SAR |
| Equity (capital, reserves, retained earnings) | 8,000,000 |
| Add: long-term loan | 4,000,000 |
| Add: provisions | 500,000 |
| Less: net fixed assets | (6,000,000) |
| Less: non-zakatable long-term investment | (500,000) |
| Zakat base | 6,000,000 |
The base is then tested against the minimum and maximum limits. If adjusted net profit for the year is SAR 1,200,000, the base sits well above the floor, so SAR 6,000,000 stands.
At a flat 2.5%, zakat would be SAR 150,000. But the 2.5% rate is set for a Hijri year of 354 days, and a Gregorian financial year runs 365 days. ZATCA applies the rate on actual days, which brings the effective rate to about 2.578% and the charge to roughly SAR 154,700.
On a base of SAR 6 million, the difference is small. On a base of SAR 200 million, it is not, and a provision booked at a flat 2.5% would fall short by a noticeable amount.
Zakat filing Saudi Arabia: deadlines, steps and penalties
Zakat filing in Saudi Arabia runs on a fixed clock. The return must reach ZATCA within 120 days of the end of the zakat year, and payment falls due on the same date. A company with a 31 December year-end must file by 30 April. A 31 March year-end moves the deadline to 29 July.
The window is tighter than it looks. Audited accounts often arrive 60 to 90 days after the year-end, which leaves a few weeks to finalise the base, review it, and submit. Companies that start the workpaper only after the auditor signs are the ones that file late.
- Close the books and finalise the audited financial statements.
- Prepare the zakat base workpaper with additions, deductions and ownership percentages.
- Test the base against the minimum and maximum limits.
- Submit the return through the ZATCA portal and pay the amount due.
- Download the zakat certificate and store it with your compliance records.
Late filing, instalments and objections
Delay triggers penalties that build up for every 30 days. If a company does not file at all, ZATCA can estimate the base from the information it holds, and that estimate becomes the starting point for collection. Instalments are possible, but only through a request to ZATCA, and the return must still be filed on time.
If you disagree with an assessment, an objection must be filed through the ZATCA website within 60 days of the notification. After that, the right to object is gone. A company that stops trading must also notify ZATCA within 60 days, or its liability keeps running.
Accounting Services KSA prepares returns, submits them through the portal, and follows up on the certificate, so you can file your zakat return in Saudi Arabia ahead of the 120-day deadline with figures you can defend.
Common zakat calculation mistakes Saudi businesses make
Treating zakat as a profit tax
Provisioning 2.5% of net profit leaves most companies under-provided. The base comes from the balance sheet, so a loss-making company can still owe zakat, and a profitable one can owe less than it expected.
Ignoring the day-count adjustment
A flat 2.5% on a 365 day year understates the charge. The gap looks minor per riyal and becomes real money across a large base.
Misclassifying shareholder loans
Under the new bylaws, shareholder credit and debit balances are treated differently depending on the company type and the shareholder’s own zakat status. A loan recorded as capital in one set of accounts and as a liability in another will not survive review.
Filing without supporting records
ZATCA can ask for contracts, bank statements, and ledgers behind any deduction. Deductions without documents are the first to be reversed in an audit, and they usually come back with penalties.
Starting too late
A preliminary base prepared in the last month of the financial year gives you time to correct classifications before the auditor closes the accounts. Waiting for the signed statements compresses every step into a few weeks.
Records to keep ready before you file
A clean file saves time at the portal and protects you if ZATCA opens a review. Gather these before you begin the workpaper:
- Audited financial statements with notes
- Trial balance and fixed asset register
- Loan agreements and shareholder loan balances
- Details of long-term investments and the investee’s zakat status
- Commercial registration and current shareholder records
- Prior year zakat return and certificate
- Any ZATCA notices, assessments or correspondence
Keep these for the full retention period and store them in one place. When a reviewer asks about a deduction, the answer should take minutes to find, not days.
When a zakat consultant in Riyadh is worth hiring
A zakat consultant Riyadh companies rely on is most useful in four situations. The first is a mixed ownership structure, where zakat and income tax run side by side and the split must be exact. The second is a balance sheet with large long-term investments, shareholder loans, or development properties, where the treatment decides the base.
The third is an assessment you disagree with, where the 60-day objection window is already running. The fourth is a business deciding whether earlier years should be filed under the new rules, a decision that depends on the numbers and on how far a ZATCA review has progressed.
A good consultant also keeps your base consistent from year to year. ZATCA compares returns over time, and a sudden swing without a clear commercial reason invites questions. For a small finance team, handing the workpaper to a specialist usually costs less than one disputed assessment.
Frequently asked questions
Is zakat calculated on revenue or profit?
Neither. Zakat is calculated on the zakat base, which comes from the balance sheet. Profit matters mainly because adjusted net profit sets the minimum limit for the base.
Do foreign-owned companies pay zakat?
The foreign share pays 20% corporate income tax instead. Only the Saudi and GCC-owned share is subject to zakat.
What happens if I miss the 120-day deadline?
Penalties build up for every 30 days of delay, and ZATCA can issue an estimated assessment. A late filing also delays your zakat certificate, which can hold up tenders and registration renewals.
Can a company pay zakat in instalments?
Yes, but only after applying to ZATCA and receiving approval. Instalments are not automatic, and the return itself is still due within the 120 days.
Does a loss-making company still owe zakat?
It can. Because the base comes from the balance sheet, a company with a loss may still have a positive base after additions and deductions. The minimum limit tied to adjusted net profit applies only where there is a profit.
Get Your Saudi Zakat Filing Right
Zakat for a Saudi business is a balance sheet exercise with a hard calendar. Build the base carefully, apply the rate on actual days, split zakat and income tax by ownership, and file within the 120 days. Most disputes come from weak workpapers and late starts, not from the rate itself.
If you want your base reviewed, your return filed, or an assessment challenged, contact Accounting Services KSA for ZATCA Zakat KSA support and zakat calculation Saudi Arabia services before your next year-end closes.
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