Zakat Rules for Saudi and Mixed-Owned Companies

Businesses operating in Saudi Arabia continue to distinguish between zakat and corporate income tax based on ownership, with zakat applied to Saudi and Gulf-owned shares while foreign-owned shares are subject to corporate income tax. Understanding the difference matters for every company preparing its 2026 filings.

For companies that are 100% owned by Saudi or GCC nationals, the entity is subject to zakat only, calculated at the prescribed rate on the zakat base. For mixed-ownership entities, zakat applies only to the Saudi/GCC ownership proportion of the base, while the foreign portion is subject to corporate income tax on taxable income.

How the zakat base is built

Zakat is not levied directly on accounting profit. Instead, it is calculated on a zakat base — a measure of net zakatable wealth. A common formula adds shareholders’ equity, long-term liabilities, provisions and additional paid-in capital, then deducts fixed and non-current assets, certain ring-fenced assets, and carried-forward losses, subject to detailed adjustments. In practice, the base is often taken as the higher of adjusted net profit or this net-worth calculation.

The rate: 2.5% or about 2.578%

The implementing regulations set the zakat rate at 2.5% of the zakat base for a complete Hijri year. Companies that report on a Gregorian fiscal year (about 365 days) apply an effective rate of roughly 2.577–2.578%, obtained by scaling the Hijri rate to the longer year. This ~2.578% effective rate is widely used in current professional practice.

For a mixed company — for example 60% Saudi/GCC and 40% foreign — zakat applies to 60% of the zakat base, while corporate income tax applies to 40% of taxable profits at the standard rate. Getting the ownership split and base calculation right helps businesses avoid assessment surprises and file accurately.

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