Zakat and Income Tax

We provide calculation of zakat and taxes according to the system applied in the Kingdom of Saudi Arabia. We also prepare and submit zakat and tax declarations, handle necessary objections, and provide consultations in this field.

Zakat is defined as taking a specific portion of specified wealth according to specified conditions for a specific group. Linguistically, it means growth and increase. Its objectives include purifying the soul, instilling virtuous behaviors, fostering social solidarity, and promoting economic development. Zakat is obligatory on all Muslim wealth when certain conditions are met: complete ownership, growth, reaching the threshold, surplus beyond basic needs, and freedom from debt.

Zakat is obligatory on every individual who meets the following conditions collectively: Islam, maturity, sanity, and freedom. Types of zakat include cash wealth zakat, trade goods zakat, agricultural produce zakat, mineral and marine wealth zakat, investment zakat, and income from work zakat.

As mentioned in the Quran, the recipients of zakat include the poor, needy, those employed to administer it, those whose hearts need reconciling, for freeing slaves, debtors, in the cause of Allah, and wayfarers.

As for taxes, they are compulsory financial deductions determined by the state, which individuals (natural and legal) are obligated to pay to the state without direct compensation, to enable it to carry out its economic, social, and political functions.

Types of taxes include direct taxes borne directly by the taxpayer and cannot be transferred to another person, such as income tax. Indirect taxes allow the taxpayer to transfer their burden to another person, such as value-added tax and customs duties. There are also non-personal taxes that do not take into account the personal circumstances or family burdens of the taxpayer, such as excise tax and value-added tax, among others.

Tax evasion is attempting to avoid paying the due tax, partially or entirely, by violating the provisions of the tax system, involving deception and fraud, such as creating fake purchases or concealing real sales. Therefore, there are deterrent penalties in all tax systems in case of tax evasion.