How to Calculate Zakat for Companies

Introduction

Zakat is a fundamental pillar that companies and individuals in Saudi Arabia adhere to, as it contributes to social solidarity. Calculating zakat for companies, however, requires a thorough understanding and precise assessment of various types of assets and financial liabilities. In this article, we outline the steps to calculate zakat for companies according to regulations and highlight key points to help companies fulfill this religious and national duty.

Steps to Calculate Zakat for Companies

1. Identifying Zakat-Eligible Assets
   Eligible assets for zakat include the company’s working capital, such as cash in bank accounts, goods available for sale, business investments, and any other current assets. Fixed assets like buildings and equipment, however, are not subject to zakat.

2. Calculating Deductible Liabilities
   Deductible liabilities, including short-term obligations that must be paid within the same fiscal year, are subtracted from the zakat base. These include trade debts, employee salaries due, and payable taxes.

3. Determining the Required Zakat Amount (2.5%)
   After calculating the total zakat-eligible assets minus liabilities, zakat is calculated at a rate of 2.5%. For example, if the zakat base is SAR 1,000,000 after deductions, the zakat owed would be SAR 25,000.

4. Consulting a Zakat Accountant or Specialist
   To ensure accuracy and compliance with regulations, consulting a qualified accountant or a zakat-specialized institution is recommended to validate calculations and adhere to accounting standards.

5. Meeting Payment Deadlines
   The Zakat, Tax, and Customs Authority (ZATCA) enforces specific deadlines for companies to submit zakat in the Kingdom. Adhering to these deadlines helps companies avoid fines and fulfill their social responsibility.

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Conclusion

Calculating zakat for companies requires careful planning and financial accuracy to comply with religious and legal requirements. Paying zakat is a responsibility that supports social justice and provides aid to those in need, reflecting the values embedded in the business environment of the Kingdom.

How to Calculate Zakat for Companies