All About Zakat in Saudi Arabia

Updated on: Apr 25th, 2024


5 min read

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Saudi Arabia follows a unique dual taxation system comprising Zakat, an Islamic obligatory tax, and income tax. Zakat is vital in promoting social welfare and financial purification, while income tax primarily contributes to state revenue.

Zakat is a fundamental pillar of Islam and a significant pillar of Saudi Arabia’s taxation system. Understanding Zakat is crucial for anyone residing in Saudi Arabia.

This article explains everything about Zakat, including, definition, calculation, payment procedures and exemptions.

What is Zakat?

Zakat, literally meaning “purification” in Arabic, is a mandatory 2.5% charitable contribution levied on specific assets Muslims possess above a certain threshold (nisab) for a specified period (haul). It purifies wealth and fosters social responsibility by supporting the underprivileged and contributing to societal development.

How is Zakat Calculated?

Calculating Zakat involves:

  • Identifying Zakat-eligible assets like cash, gold, silver, investments, and business inventory.
  • Determining the nisab value for each asset category.
  • Calculating 2.5% of the asset value exceeding the nisab.

What assets and income are exempted from Zakat?

Specified assets and income are exempt from Zakat, including:

  • Personal belongings
  • Primary residence
  • Debts and liabilities
  • Household items
  • Income used for basic needs
  • Agricultural produce until harvest and sale

Who Should Pay Zakat?

Muslims who meet the following criteria are obligated to pay Zakat:

  • Reaching the age of puberty and mental maturity.
  • Possessing wealth exceeding the nisab for a full lunar year.

What is the difference between Zakat base and Zakat?

  • Zakat base: The total value of Zakat-eligible assets exceeding the nisab.
  • Zakat: The calculated amount payable (2.5%) is based on the Zakat base.

Due dates for Zakat payment

Zakat becomes due upon completing one lunar year of possessing wealth exceeding the nisab. There’s no fixed calendar date for payment; it aligns with the Islamic lunar calendar.

How to pay Zakat in Saudi Arabia?

Eligible persons can pay Zakat through various channels authorized by the Zakat, Tax and Customs Authority (ZATCA):

  • Designated bank branches
  • ZATCA online portal
  • Mobile apps of authorized banks

How to file Zakat?

  1. Gather information: Calculate your Zakat base and Zakat amount for each Zakat-eligible asset.
  2. Choose a payment method: Select your preferred payment channel.
  3. Make the payment: Submit your Zakat payment using the chosen channel.
  4. Keep records: Maintain proper documentation of your Zakat calculations and payments.

Frequently Asked Questions

Who pays income tax in Saudi Arabia?

Resident individuals earning income above a specific threshold and non-resident individuals with Saudi-sourced income are subject to income tax.

What is the Zakat rate?

The standard Zakat rate is 2.5% of the Zakat base for most assets.

Who pays Zakat?

Muslims who meet the nisab and haul requirements are obligated to pay Zakat.

What are the penalties for not paying Zakat?

Not paying Zakat is considered a religious offence, but Saudi Arabia does not impose legal penalties for non-payment.

What is the difference between income tax and Zakat?

Zakat is a religious obligation based on wealth, while income tax is a government levy on income earned. Zakat prioritises social welfare, while income tax contributes to state revenue.