Understanding Zakat Payers Subject to the Regulations in Saudi Arabia

In the Kingdom of Saudi Arabia, Zakat is a fundamental pillar of Islamic finance, and it is regulated by specific laws to ensure its fair collection and distribution. The regulations governing Zakat payers outline who is required to comply with Zakat obligations. Here, we explore the key entities subject to these provisions under the Saudi Zakat Tax framework.

1. Resident Saudi Persons Engaged in Licensed Activities

The first group subject to Zakat under the regulations are resident Saudi individuals who are actively involved in business or commercial activities. These individuals must hold a valid license to conduct their operations within the Kingdom. The Zakat obligations apply to individuals who are engaged in trade, services, or any other licensed business activity, ensuring that their income and wealth are appropriately taxed under Saudi law.

2. Sole Corporations Owned by Saudi Nationals

Sole proprietorships or corporations established and wholly owned by Saudi nationals within the Kingdom fall under the purview of the Zakat regulations. These entities are subject to Zakat, as they are considered part of the Saudi economic framework. The regulations ensure that such businesses contribute their fair share to the Zakat system, which aims to promote social welfare and economic justice.

3. Companies Owned by Saudi Nationals

The regulations also extend to companies that are owned by Saudi nationals and established in the Kingdom. This includes both small and large businesses, where the shares are predominantly held by Saudi partners or shareholders. Zakat is applied based on the shares held by Saudi investors, as well as the shares owned by Saudi government bodies, agencies, and equivalents. These entities are expected to comply with the Zakat provisions, which contribute to the overall financial health of the Kingdom.

4. Finance Funds Licensed by the Capital Market Authority (CMA)

Another critical group subject to the Zakat regulations is financial funds licensed by the Capital Market Authority (CMA). These funds operate within the regulatory framework set forth by the CMA, and their activities are crucial for the financial ecosystem in Saudi Arabia. Zakat obligations ensure that these funds contribute to the public good in alignment with Islamic principles.

5. State-Owned Companies and Public Investment Fund (PIF) Entities

State-owned companies and those owned by the Public Investment Fund (PIF) are also required to adhere to the Zakat regulations. These entities, operating in various sectors from infrastructure to energy, are governed by Royal Orders and Ministerial Resolutions. The Zakat collected from these entities helps sustain social development programs and other government initiatives aimed at national progress.

6. Stock Exchanges and Non-Saudi Shareholders

Finally, stock exchanges operating in Saudi Arabia are subject to Zakat, except for shares held by non-Saudi founders. The Zakat regulations differentiate between shares owned by Saudi and non-Saudi shareholders, aligning with the company’s articles of association or other relevant statutory documents. This distinction ensures that Zakat is applied equitably across the stock exchange and related entities.

Conclusion

The Saudi Zakat Tax system is designed to ensure that all relevant entities contribute to the national economy in a fair and equitable manner. From individual entrepreneurs to large public companies, the scope of Zakat payers under the regulations is wide-ranging. By adhering to these provisions, businesses not only fulfill their religious obligations but also contribute to the prosperity and development of the Kingdom. Compliance with these regulations is vital for ensuring that Zakat continues to play a central role in Saudi Arabia’s social and economic landscape.

summary

In Saudi Arabia, the Zakat regulations specify which entities are required to pay Zakat. These include resident Saudi individuals engaged in licensed activities, sole corporations and companies owned by Saudi nationals, finance funds licensed by the Capital Market Authority, state-owned companies, entities owned by the Public Investment Fund, and stock exchanges (excluding shares held by non-Saudi founders). These regulations ensure that businesses and individuals contribute fairly to the Kingdom’s social welfare and economic development, in line with Islamic principles. Compliance is essential for businesses operating in Saudi Arabia to fulfill their obligations and support national progress.

Disclaimer:  The Content offers general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.  

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