How Companies Calculate Zakat in Saudi Arabia

Companies operating in Saudi Arabia calculate and pay zakat through the electronic portal of the Zakat, Tax and Customs Authority (ZATCA), which administers all business zakat registration, filing, payment, and objections. The process is handled solely through this portal and not through other government platforms.

The standard zakat rate for companies is 2.5% of the zakat base for a Hijri year, or 2.578% for a full Gregorian year. When a company's fiscal year differs from the Hijri year, the rate is prorated by days, calculated by dividing 2.5% by the number of Hijri days and multiplying by the number of fiscal-year days.

Who is subject to zakat

Resident companies whose capital is fully owned by Saudi or GCC nationals are subject to zakat on their entire zakat base. This applies to commercial entities registered in the Kingdom, including limited liability companies, joint-stock companies, and partnerships with Saudi or GCC ownership.

For companies with mixed Saudi/GCC and foreign ownership, zakat applies only to the Saudi/GCC share, while corporate income tax applies to the foreign share. The bases are split proportionately and are usually adjusted if ownership changes during the year. Zakat and corporate income tax are calculated separately, and neither can be credited against the other.

How the zakat base is worked out

The zakat base is calculated by adding zakat items and deducting non-zakat items as set out in the implementing regulations. In practice, the base broadly equals zakatable assets minus short-term or deductible liabilities, with zakat due equal to the base multiplied by 2.5%.

Using the equity approach, the base broadly equals equity plus certain non-current liabilities, minus allowable deductions such as fixed assets and qualifying investments. Positive items typically include share capital, retained earnings, reserves, long-term loans and financing, non-current related-party payables, and year-end provisions. Understanding these rules helps business owners file accurately and stay compliant.

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