In the Kingdom of Saudi Arabia (KSA), fulfilling both religious and legal financial obligations is an important part of life. Zakat, a religious obligation, and taxes mandated by the government, coexist within the financial system. Understanding the differences and how they work together can ensure you meet your spiritual and legal duties.

Zakat: A Pillar of Islam

Zakat is one of the Five Pillars of Islam, a mandatory charitable contribution that purifies your wealth and promotes social responsibility. It is calculated as a fixed percentage of your eligible assets, such as cash, gold, silver, and some types of investments. The specific rate varies depending on the asset type and whether it is held for business purposes or personal use.

Zakat vs. Income Tax

While both Zakat and tax involve financial contributions, they differ in purpose and calculation:

• Purpose: Zakat is a religious obligation, fulfilling a spiritual duty and contributing to social welfare. Taxes, on the other hand, fund government services and infrastructure development.

• Calculation: Zakat is a fixed percentage of your eligible assets. Income tax, however, is levied on your taxable income, which is your gross income minus certain deductions and allowances.

Who Pays What?

• Zakat: Saudi citizens and residents who meet the nisab (minimum wealth threshold) are liable to pay Zakat.

• Tax:

  • Zakat: Saudi citizens and GCC citizens are generally exempt from income tax but are liable for Zakat.

  • Income Tax: Non-Saudi residents and companies operating in KSA are typically subject to income tax on their earnings within the Kingdom.

Government Authority:

The Zakat, Tax and Customs Authority (ZATCA) is responsible for overseeing both Zakat collection and tax administration in KSA. They provide resources and guidance to ensure residents fulfil their obligations.

Balancing Your Duties:

Fulfilling both Zakat and tax obligations demonstrates your commitment to your faith and the Kingdom's development. Here are some tips:

• Maintain accurate financial records: This simplifies calculating Zakat and preparing tax returns.

• Stay informed: Regularly consult ZATCA's resources or seek guidance from qualified professionals for any complexities.

• Pay on time: Avoid late penalties by fulfilling your obligations within the designated timeframes.

Conclusion:

Zakat and tax are distinct financial obligations that contribute to the well-being of both individuals and society in KSA. By understanding their differences and adhering to the guidelines, you can ensure you meet your spiritual and legal duties with peace of mind.