---
title: "Zakat Accounting for Companies in Saudi Arabia: Base, Rate, Journal Entries and Reporting"
description: "Zakat accounting for Saudi companies: who pays, the Zakat base under the 2024 regulation, 2.5% vs the Gregorian year rate, a worked SAR example and entries."
canonical: https://ledgeriano.com/guides/zakat-accounting
language: en
publisher: "Ledgeriano"
published: 2026-11-06
updated: 2026-11-06
---

# Zakat Accounting for Companies in Saudi Arabia: Base, Rate, Journal Entries and Reporting

> Zakat accounting for Saudi companies: who pays, the Zakat base under the 2024 regulation, 2.5% vs the Gregorian year rate, a worked SAR example and entries.

Zakat accounting for a Saudi company means working out the Zakat base from the balance sheet (equity and funding sources less deductible long-term assets), applying 2.5% for a Hijri year or a day-adjusted rate of about 2.5776% for a 365-day Gregorian year, booking the result as an expense and a liability, and filing within 120 days of year end.

## Key takeaways

- Zakat applies to the share of a Saudi company owned by Saudi and GCC nationals; the share owned by others pays 20% corporate income tax instead.
- The Zakat base is broadly the entity's net worth for Zakat purposes: Zakat items added, non-Zakat items such as fixed assets deducted.
- The current Zakat Implementing Regulation (Ministerial Resolution No. 1007 of 2024) applies to financial years starting on or after 1 January 2024.
- The rate is 2.5% for a Hijri year; for a Gregorian year it is pro-rated by days, about 2.5776% for a 365-day year.
- Book Zakat on the accrual basis at year end (Dr Zakat expense, Cr Zakat payable) and agree the presentation policy with your auditor.
- Accounting software keeps the balances that feed the calculation; the Zakat computation and return remain a tax task.

Zakat accounting is how a company in Saudi Arabia measures, records and reports the Zakat it owes to the Zakat, Tax and Customs Authority (ZATCA). Unlike income tax, which is charged on profit, Zakat is charged on a base that looks more like the company's net worth: money that has been in the business through the year and is not tied up in long-term assets.

This guide explains who pays Zakat, how the base is built under the regulation in force since 2024, which rate applies to a Gregorian financial year, a complete worked example in SAR, the journal entries and how Zakat appears in IFRS financial statements.

> **General information, not tax or religious advice.** Rules summarised here were checked against ZATCA material and Big Four summaries (KPMG, PwC) as of November 2026. The Zakat base calculation has many specific adjustments; confirm your computation with [ZATCA](https://zatca.gov.sa/en/) or a licensed adviser before you file.

## Zakat for companies at a glance

| Item | Rule (as of November 2026) |
|---|---|
| Who pays | Companies to the extent owned by Saudi and GCC nationals (and certain other cases); other owners' share pays income tax |
| Income tax on non-Saudi, non-GCC share | 20% of net adjusted profits |
| Governing rules | Zakat Implementing Regulation, Ministerial Resolution No. 1007 dated 29 February 2024 |
| Applies to | Financial years starting on or after 1 January 2024 |
| Rate, Hijri year | 2.5% of the Zakat base |
| Rate, Gregorian year | Pro-rated by actual days: 2.5% x 365 / 354, about 2.5776% |
| Filing and payment | Within 120 days after the financial year end |
| Attachments | Audited financial statements, for companies owned by Saudis or by Saudis and non-Saudis |

Sources: KPMG Saudi Arabia, [tax alert on the new Zakat Implementing Regulation](https://kpmg.com/sa/en/insights/tax-insights/tax-alert-saudi-minister-of-finance-approves-new-zakat-implementing-regulation.html) (2024); PwC Worldwide Tax Summaries, [Saudi Arabia corporate taxes on income](https://taxsummaries.pwc.com/saudi-arabia/corporate/taxes-on-corporate-income) and [tax administration](https://taxsummaries.pwc.com/saudi-arabia/corporate/tax-administration) (last reviewed July 2026).

## What is Zakat for businesses?

Zakat for businesses is an annual levy of 2.5% (for a lunar year) on the Zakat base of a company owned by Saudi or GCC nationals. In Saudi Arabia it is a legal obligation administered by ZATCA, not a voluntary donation, and the company calculates it in a self-assessed return.

PwC describes the Zakat base as "the net worth of the entity as calculated for Zakat purposes". In practice that means equity and long-term funding, adjusted by the year's profit, less the assets that are not subject to Zakat such as property, plant and equipment.

## Who pays Zakat and who pays income tax?

Ownership decides. The share of a company owned by Saudi citizens and GCC nationals (who are treated like Saudis for this purpose) is subject to Zakat. The share owned by non-Saudi, non-GCC owners is subject to corporate income tax at 20%. A company with mixed ownership therefore files one return that contains both: Zakat on the Saudi and GCC share of the Zakat base, and income tax on the foreign share of taxable profit.

| Ownership | Zakat | Income tax |
|---|---|---|
| 100% Saudi or GCC nationals | On 100% of the Zakat base | None |
| 70% Saudi, 30% foreign | On 70% of the Zakat base | 20% on 30% of net adjusted profit |
| 100% foreign | None | 20% on net adjusted profit |

Special regimes exist (for example for listed companies and certain sectors), so check how your shareholders are classified before you compute anything.

## How is the Zakat base calculated?

The Zakat base is calculated by adding Zakat items and deducting non-Zakat items, as KPMG summarises the 2024 regulation. The regulation lists both sides in detail and adds minimum and maximum limits (Articles 27 and 28) that bound the result.

### Typical additions (Zakat items)

- Paid-up capital and capital contributions
- Statutory and other reserves, and retained earnings brought forward
- Provisions brought forward, such as end-of-service benefits, to the extent the regulation allows
- Loans and similar funding, within the limits the regulation sets
- The adjusted net profit for the year (accounting profit adjusted for items such as non-deductible provisions)

### Typical deductions (non-Zakat items)

- Net book value of property, plant and equipment and intangible assets used in the business
- Long-term investments in entities that are themselves subject to Zakat in Saudi Arabia
- Accumulated losses
- Certain other assets the regulation lists as deductible

The exact treatment of each item, especially funding and provisions, is where most disputes with ZATCA arise. Keep the working papers that tie every figure to an account balance.

## Which Zakat rate applies to a Gregorian financial year?

A company with a Hijri financial year applies 2.5%. A company with a Gregorian financial year applies a rate pro-rated by the actual number of days, because a Gregorian year (365 days) is longer than a Hijri year (about 354 days). The common computation is:

> Gregorian rate = 2.5% x 365 / 354 = about 2.5776%

KPMG's summary of Article 15 describes this as "approximately 2.57%". Some advisers use a slightly different Hijri day count, so agree the exact factor with your adviser and use it consistently. A first or last period shorter than a year is pro-rated as well.

## Worked example: Zakat for a Saudi-owned company

Najd Foods Co. is 100% owned by Saudi nationals. Its financial year runs from 1 January to 31 December 2025 (365 days) and its base currency is SAR. Simplified figures from its accounts and Zakat adjustments:

| Zakat items (additions) | SAR |
|---|---|
| Paid-up share capital | 2,000,000 |
| Statutory reserve | 300,000 |
| Retained earnings brought forward | 1,200,000 |
| End-of-service provision brought forward | 250,000 |
| Long-term loan financing deductible assets | 1,000,000 |
| Adjusted net profit for the year | 900,000 |
| **Total additions** | **5,650,000** |

| Non-Zakat items (deductions) | SAR |
|---|---|
| Property, plant and equipment, net | 3,100,000 |
| Investment in a Saudi subsidiary subject to Zakat | 500,000 |
| **Total deductions** | **3,600,000** |

Zakat base = 5,650,000 minus 3,600,000 = **SAR 2,050,000**.

Zakat = 2,050,000 x 2.5% x 365 / 354 = 51,250 x 1.0310734 = **SAR 52,842.51**.

If Najd Foods were 70% Saudi owned and 30% owned by a European investor, Zakat would be charged on 70% of the base (SAR 36,989.76) and income tax at 20% on 30% of the net adjusted profit for tax purposes.

> **Warning:** this example skips the regulation's detailed rules on funding, provisions and the minimum and maximum limits. Use it to understand the mechanics, not as a template for a return.

## Zakat journal entries

Zakat is recorded on the accrual basis at year end, then settled when paid. Codes below are from the GCC IFRS chart of accounts template in Ledgeriano.

**At 31 December 2025, recognise the Zakat charge:**

| Account | Debit (SAR) | Credit (SAR) |
|---|---|---|
| 810101 Zakat expense | 52,842.51 | |
| 210304 Zakat payable | | 52,842.51 |

**When the return is filed and Zakat paid (by 30 April 2026):**

| Account | Debit (SAR) | Credit (SAR) |
|---|---|---|
| 210304 Zakat payable | 52,842.51 | |
| 110103 Bank, main current account | | 52,842.51 |

**If a ZATCA assessment later adds SAR 6,000** for an earlier year, the usual treatment is a change in estimate in the year it arises (Dr Zakat expense, Cr Zakat payable), unless it is a prior-period error under IAS 8. Discuss significant assessments with your auditor.

Accrue Zakat before you run the year-end close, so the expense flows into the income summary and retained earnings with everything else. The [year-end closing guide](https://ledgeriano.com/guides/year-end-closing) shows that sequence.

## How is Zakat presented in IFRS financial statements?

No IFRS standard deals with Zakat specifically, so Saudi companies follow the practice endorsed locally by SOCPA: Zakat is recognised as an expense in profit or loss on the accrual basis, shown on its own line (often "Zakat" or "Zakat and income tax"), with the payable presented as a current liability. Some entities account for it by analogy to IAS 12 Income Taxes and others under IAS 37 Provisions; the policy should be disclosed and applied consistently. A typical disclosure includes the components of the Zakat base, the charge for the year, movements in the provision and the status of assessments.

| Statement | Where Zakat appears |
|---|---|
| Income statement | A separate line after profit before Zakat and income tax |
| Balance sheet | Zakat payable within current liabilities |
| Cash flow statement | Zakat paid, usually within operating activities |
| Notes | Base components, charge, provision movement, assessments |

See the [financial statements guide](https://ledgeriano.com/guides/financial-statements) for how the statements fit together, and [IFRS vs US GAAP](https://ledgeriano.com/guides/ifrs-vs-us-gaap) if your group also reports under US GAAP.

## How Ledgeriano helps with Zakat accounting

Ledgeriano keeps the books that the Zakat computation is built from. It does not compute the Zakat base automatically and does not file the Zakat return.

- **Ready accounts.** The GCC IFRS template includes Zakat expense (810101), Zakat payable (210304), corporate income tax payable (210305), statutory reserve, end-of-service provisions and the equity accounts the base starts from. See [supported standards](https://ledgeriano.com/standards).
- **Reports for the working papers.** The 6-column trial balance gives opening balances, movements and closing balances in one view; the balance sheet and statement of changes in equity show prior-year comparatives; ledgers list every entry behind a balance. All export to CSV for your Zakat workbook.
- **Separate companies, separate bases.** Each subsidiary is its own business with its own fiscal years, so each entity's base is computed from its own books ([multi-entity accounting](https://ledgeriano.com/guides/multi-entity-accounting)).
- **Controls.** Year-end closing into retained earnings, an opening entry for the next year, lock dates once the return is filed and an audit trail on every entry.
- **Gregorian fiscal years.** Each business sets its own year dates on the Gregorian calendar, so use the day-adjusted rate.

## Common Zakat accounting mistakes

- **Applying 2.5% to a Gregorian year** without the day adjustment.
- **Charging Zakat on the whole base** of a company with foreign shareholders.
- **Forgetting to accrue** Zakat at year end, then expensing it when paid in the next year.
- **Losing the trail** between the Zakat workbook and the ledger. Every figure in the base should tie to an account or a report.
- **Mixing Zakat with VAT balances.** Keep VAT payable, Zakat payable and income tax payable in separate accounts, even if they sit under one parent; the [UAE VAT guide](https://ledgeriano.com/guides/uae-vat-accounting) shows the VAT side.

## How to account for Zakat at year end

1. **Close the books for the year**: Post all adjustments so the trial balance, balance sheet and income statement are final before Zakat.
2. **Build the Zakat base**: Export the trial balance and list Zakat items to add and non-Zakat items to deduct, with a reference to each account.
3. **Apply the ownership split**: Take the Saudi and GCC share of the base for Zakat and the remaining share of adjusted profit for income tax.
4. **Apply the correct rate**: Use 2.5% for a Hijri year or the day-adjusted rate for a Gregorian year.
5. **Record the accrual**: Debit Zakat expense and credit Zakat payable, then run the year-end close.
6. **File, pay and lock**: File within 120 days of year end, record the payment against Zakat payable and lock the closed year.

## Frequently asked questions

### How is Zakat calculated for a company in Saudi Arabia?

Start from the balance sheet: add Zakat items such as capital, reserves, retained earnings, certain provisions and funding, and the adjusted net profit; deduct non-Zakat items such as net fixed assets and investments in Saudi entities subject to Zakat. Apply the rate to the resulting base and to the Saudi and GCC ownership share only.

### What is the Zakat rate for a Gregorian financial year?

2.5% applies to a Hijri year. For a Gregorian year the rate is pro-rated by the actual number of days, commonly computed as 2.5% x 365 / 354, about 2.5776%. KPMG describes it as approximately 2.57%.

### Who has to pay Zakat in Saudi Arabia?

Companies to the extent they are owned by Saudi and GCC nationals. The share owned by other investors pays corporate income tax at 20% of net adjusted profits instead, so mixed-ownership companies deal with both.

### When is the Zakat return due?

The return and payment are due within 120 days after the end of the financial year. A company with a 31 December year end must file by the end of April.

### What is the journal entry for Zakat?

At year end, debit Zakat expense and credit Zakat payable for the calculated amount. When paid, debit Zakat payable and credit the bank account.

### Is Zakat an expense or a distribution under IFRS?

Saudi practice endorsed by SOCPA recognises Zakat as an expense in profit or loss on the accrual basis, usually on a separate line. Entities apply IAS 12 or IAS 37 by analogy and disclose the policy.

### Which rules apply to Zakat years from 2024?

The Zakat Implementing Regulation approved by Ministerial Resolution No. 1007 of 29 February 2024 applies to financial years starting on or after 1 January 2024. It replaced the 2019 regulation.

### Can Ledgeriano calculate Zakat automatically?

No. Ledgeriano provides the Zakat accounts in its GCC IFRS chart and the trial balance, balance sheet and equity reports your adviser needs, with CSV export. The Zakat base computation and the return are prepared outside the ledger.