---
title: "Zakat"
description: "What zakat is for companies in Saudi Arabia, how the zakat base is built from the balance sheet, the 2.5% rate and its Gregorian-year adjustment, by example."
canonical: https://ledgeriano.com/glossary/zakat
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Zakat

> What zakat is for companies in Saudi Arabia, how the zakat base is built from the balance sheet, the 2.5% rate and its Gregorian-year adjustment, by example.

Zakat for companies is an annual Islamic levy that Saudi-owned and GCC-owned businesses in Saudi Arabia calculate and pay to ZATCA, the Zakat, Tax and Customs Authority. It is charged at 2.5% of a zakat base built mainly from equity, long-term financing and provisions, less long-term assets, for a Hijri year.

Zakat is not an income tax. The base starts from sources of funds (share capital, reserves, retained earnings, adjusted profit for the year, long-term loans and provisions) and deducts uses of funds that are not zakatable, mainly fixed assets, long-term investments and intangible assets, within limits set by the Zakat Implementing Regulations issued in 2024. Mixed-ownership companies pay zakat on the Saudi and GCC share and corporate income tax on the foreign share.

The 2.5% rate applies to a Hijri year of about 354 days. Companies with a Gregorian financial year adjust the rate for the number of days, which gives about 2.5775% for a 365-day year (2.5% × 365 ÷ 354). Some taxpayers are assessed on a deemed basis instead, with different rules.

Zakat is recognised as an expense and a liability, and companies usually present it near income tax. Because the base depends on balance sheet classification, a chart of accounts that separates long-term from short-term items helps, as in the [GCC chart of accounts template](https://ledgeriano.com/templates/gcc-chart-of-accounts). The rules are detailed and change: confirm with ZATCA guidance or a qualified adviser before filing.

```
Zakat base = Zakatable sources of funds - Deductible long-term assets
Zakat (Hijri year) = Zakat base × 2.5%
Zakat (Gregorian year) = Zakat base × 2.5% × Days in year ÷ 354
```

## Example: a simplified zakat base

A Saudi company with a Gregorian year has equity of SAR 8,000,000, adjusted net profit of SAR 1,500,000 and long-term loans of SAR 2,000,000. Its net fixed assets are SAR 6,500,000.

A simplified base is 8,000,000 + 1,500,000 + 2,000,000 - 6,500,000 = SAR 5,000,000. Zakat at about 2.5775% is roughly SAR 128,875. Real filings apply many more adjustments and limits, so treat this only as an illustration.

### Is zakat the same as income tax?

No. Income tax is charged on taxable profit; zakat is charged on a base built mostly from the balance sheet. In Saudi Arabia, foreign shareholders' shares are subject to corporate income tax instead of zakat.

### Why is the zakat rate higher than 2.5% for some companies?

Because 2.5% applies to a Hijri year of about 354 days. A company with a 365-day Gregorian year scales the rate up for the extra days, to about 2.5775%.