Updated 2024 Zakat Rules for Saudi & GCC-Owned Shares

Businesses operating in the Kingdom face updated zakat rules that took effect for financial years starting on or after 1 January 2024, following an amendment to the Zakat Implementing Regulation through Ministerial Resolution No. 1007. The changes clarify how zakat and corporate income tax apply to companies based on the nationality of their owners.

Under the framework, resident companies that are wholly owned by Saudi or GCC nationals — with no non-GCC entity anywhere in the ownership chain — are subject only to zakat, not corporate income tax. The statutory zakat rate on Saudi and GCC-owned shares is 2.5% of the zakat base. Some guides apply an effective rate of about 2.577% when calculated on a Gregorian-year basis, but the nominal rate remains 2.5%.

How mixed-ownership companies are treated

Companies that combine Saudi or GCC shareholders with foreign owners fall under a dual system. Zakat at 2.5% is applied to the Saudi and GCC ownership share, while corporate income tax at 20% is applied to the foreign (non-GCC) ownership share. The zakat base is allocated to Saudi and GCC shareholders in proportion to their ownership percentage, and the corporate tax base is allocated to non-GCC shareholders in the same way.

Non-Saudi shares in these entities are not treated as Saudi shares for tax purposes, so they remain subject to corporate income tax rather than zakat. For investment funds, a unitholder's zakat is calculated by multiplying the fund's zakat base by their ownership percentage and then by the 2.5% rate, with Saudi and GCC unitholders treated as zakat payers on their share.

Zakat for Saudi and GCC shareholders is determined at year-end based on ownership percentage, without adjusting for intra-year ownership changes or changes in legal form. Shares held for trading are subject to zakat on market value plus undistributed profits. The updated rules matter for investors and business owners planning ownership structures, as the split between zakat and tax now hinges clearly on shareholder nationality.

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