6 Days a Week
Free On Premise
Accounts & VAT
The Kingdom of Saudi Arabia has a very special system of double taxation that mixes religious duties with the administration of the kingdom. Of these components, it is possible to mention here Zakat in Saudi Arabia as the Islamic mandatory tax together with the income tax. Zakat which in Arabic means ‘to purify’, is a concept that is at once religious and secular. It supports social justice and equity which is another principle which has been embraced in an Islamic society as a responsible society. However, Zakat is aimed at helping the poor and the needy, which in its turn creates a tolerant society, unlike the income tax which is designed to fill state’s treasury.
Every individual and firm in the Kingdom of Saudi Arabia ought to know about administration of zakat. This tax system is not only a fiscal necessity it is a moral and religious necessity for any Muslim. The idea is based on the process of washing money through giving part of it to the needy persons. This duty is one of the pillars of Islam and it is one of the main constituents of the legislation on taxation in Saudi Arabia. Moreover, for the expatriates and non-Muslims, e-invoicing in Saudi Arabia it is useful to know this system to plan for, and to be acceptable in, Saudi Arabia since it has been incorporated in the kingdom’s economic reform program.
This provides the reader with a clear guideline on the topic of Zakat in Saudi Arabia because it seeks to addresses what it is, how to calculate it and how to make the payment of Zakat and the permissible exclusions. It also explains how e-invoicing and e-invoicing in Riyadh has changed Saudi Arabia for tax compliance. In this way the readers will be in a position to comprehend the function that Zakat plays in the actualization of the socio- economic fabric of the Kingdom insofar as the laws that define it is concerned.
Zakat is the Arabic term that means ‘purification’, it is one of the five categories of financial dues. It is a form of charity of 2.5% which is given on specific types of wealth such as savings, investment, business assets among others that exceed a specific value called Nisab. This obligation is to assets which are held for a period of not less than one lunar year for the word ‘haul’, to bring out the periodic nature. The rationale for Zakat is to purify the money by donating some amount to the poor in order to get rid of arrogance and to make the rich Muslim spend their money in circulation in the society.
Yet, in the social and economic perspective, Zakat in Saudi Arabia is one of the most essential duties because it aim at building up social justice and economical balance. The money collected is remitted to the identified poor, needy, Zakat in Saudi Arabia indigent and those in debts and for social purposes. Thus, the Zakat helps in eliminating different levels of income and assists in the improvement of the position of certain parts of society which in turn contributes to an integration of society. The above practice proves the existence of the close relationship between faith and socio-economic justice in Islam.
Calculating Zakat involves:
• List of assets that are eligible for zakat such as cash, gold, silver, investment, business inventories etc.
• Defining the nisab for every type of asset.
• Finding 2.5% of the asset value over nisab.
Specified assets and income are exempt from Zakat, including:
Personal Belongings
These include clothing, personal use trinkets (if they do not meet the nisab value), and daily accessories. These things are essentials and not covered under the heads of wealth to be invested or accumulated and hence is exempt from Zakat.
Primary Residence
The first house of living or the house that a person occupies to live in together with his family is not subjected to Zakat. Because it is a fundamental necessity rather than a form of wealth, it disqualifies from calculation for Zakat.
Debts and Liabilities
Debts and liabilities are a net subtraction of an individual’s worth and thus are subtracted before computing for Zakat. This makes certain that only the excess wealth, which does not have any liability attached to it, is eligible for the Zakat.
Household Items
Food products which are used in the home and are not for sale are not subject to Zakat, neither are furniture, utensils, appliances among other items. These are considered essential in the community, and they do not constitute assets.
Income Used for Basic Needs
What is used to pay for necessities of life including food, clothing, education, and health expenses does not attract Zakat. Such expenses guarantee that people do not have to spend extra money for a decent living standard.
Agricultural Produce Until Harvest and Sale
The agricultural products do not attract Zakat until they have been grown and sold in the market. This exemption is important because farmers need to protect their means of earning a living and control their expenses before they can give to Zakat.
Muslims who meet the following criteria are obligated to pay Zakat:
Reaching the Age of Puberty and Mental Maturity
As for our discussion, we discovered that zakat is obligatory on all the Muslim who are of puberty age and have a normal understanding. This will help the individuals to continue having knowledge on the aspect of Zakat as a religious obligation from the financial side as well. But as to the performance of Zakat, any other dependant that is minor or any other dependant that possess property above nisab must be done by the legal or the appointed agent.
Possessing Wealth Exceeding the Nisab for a Full Lunar Year
Any person having property or wealth of nisab amount or more at any time in a lunar year (haul) is eligible for receiving Zakat. It also makes sure that the wealth created is not due to a single incidence. Zakat is paid only to fixed, constant, voluntary, and continuous extra, for social causes and to equalize fiscal rates.
Zakat Base
The Zakat base means the total value of all the items that are liable for Zakat if they exceed the nisab limit. These assets include, but are not limited to, cash, fixed deposit, shares, profits earned from business ventures, and merchandise. Base on this aspect of surplus wealth the Zakat base is fair and only people with the ability to pay are expected to pay while necessities and liabilities are excluded.
Zakat
Zakat is the payable sum, which is 2.5% of the Zakat base that eligible individuals are obligated to pay annually. This fixed percentage makes the calculation easier and easier because it never changes. The received Zakat funds are given to many social welfare needs, which help to reduce poverty in the community of the Muslims and also satisfy the Islamic obligation.
Zakat is due once an individual’s wealth has been above the nisab for a complete lunar year called haul. This period starts at the time when the wealth first became equal to or exceeds the nisab and ends on the same date of the subsequent Islamic lunar year. Thus, unlike most other financial obligations associated with a certain date on a gregorian calendar, Zakat comes on the Islamic lunar calendar, which underlines its nature.
Ramadan is a perfect time to pay the Zakat as there is no exact date set in the Gregorian calendar, but the rewards and blessings are higher. However, staying true to completion of the haul is very important in order to avoid breaching the requirements. On time or early payment enables zakat to play its role of helping the needy in the society and general welfare.
Eligible individuals can pay Zakat through a variety of outlets allowed by the Zakat, Tax, & Customs Authority (ZATCA).
Designated Bank Branches
Collection of zakat can be made in any branch of the bank that has been approved by the Zakat, Tax, and Customs Authority (ZATCA). These branches are safe and reliable means of discharging Zakat responsibilities. People can go to branches, fill out form K1, and make payments through bank officers.
ZATCA Online Portal
The ZATCA online portal is another way through which people can easily pay for Zakat. The members can login, calculate their zakat and pay zakat amount online through secured mode. This channel affords the requisite transparency and openness, and also enables people to discharge their responsibilities from their homes without violating the laws of KSA.
Mobile Apps of Authorized Banks
Most of the authorized banks have adopted the feature of mobile applications to help in making zakat payments. It allows the users to perform all the calculation, Zakat in Saudi Arabia tracking and payment of Zakat through their smart phones. Mobile banking apps that provide easy to use interfaces and safe payment structures have thus become acceptable means of conducting Zakat services on time.
Gather Information
Start with determining and summing up the base of Zakat calculation which is all owned things that are reachable by Zakat in case they exceed nisab level. Calculate the amount of Zakat which shall be paid on each head of account like savings, investments or trading stock at the rate of 2.5%. To meet the Islamic purpose of Zakat, its calculations need to be precise while meeting the spiritual and social aspects of the Zakat obligations.
Choose a Payment Method
Choose an easy and legal mode of payment for filing Zakat. Available choices are specific branches of banks, Zakat in Saudi Arabia the ZATCA website, or mobile applications offered by the licensed banks. Both methods provide safe and convenient means of paying Zakat and you can opt for any that suits your type.
Make the Payment
After these calculations are done and payment channel selected, go ahead and pay your Zakat. Make sure that values of assets are accurately entered, as well as all the payment data. On time payment shows that the bank is in compliance with Islamic banking principles as well as show concern in the welfare of the community.
Keep Records
It is advisable to keep records of the amount of Zakat calculated and the receipts of payment for future use. Documentation is very crucial as it acts as evidence of accomplishment, avoid duplication of the same work in different years, Zakat in Saudi Arabia and it makes work easier each year. Orderliness in record keeping also brings order and relief with regard to both secular and spiritual responsibilities.
Conclusion
The people and business of Saudi Arabia should know about Zakat because it makes people feel spiritual and be socially productive. Zakat in Saudi Arabia is also vital in the preservation of order and stability in the society as it also works in the redistribution of wealth and supporting the needy in the society. That it has been incorporated into the taxation systems reveal the Saudi efforts at integrating Shariah with modern day administration making it central to the Kingdom’s fiscal regime.
By the use of conventional methods of communication or by the use of the modern technological methods with the help of e-invoicing for Saudi Arabia and e-invoicing in Riyadh, the method of calculation as well as the payment of Zakat has been made easier. Pursuant to it, the people perform their religious duty and also contribute to the growth and order of the society. This paper set out to argue that giving Zakat in Saudi Arabia is beneficial for the giver and the recipients hence fostering oneness and care among Muslims.
