Introduction: Zakat, Tax, and the ZATCA

The Zakat, Tax and Customs Authority (ZATCA) is the regulatory body responsible for tax collection and assessment in Saudi Arabia. This includes the collection of Zakat, a religious tax, as well as Value Added Tax (VAT). In cases of disputes between ZATCA and taxpayers, these issues are addressed by the Dispute Resolution Committee (DRC). ZATCA collects Zakat annually from individuals and businesses in accordance with Sharia law, aiming to contribute to the economic advancement of the Kingdom. For companies, Zakat is calculated at a rate of 2.5% based on their zakat base. As the issuer of the Zakat Collection Law in KSA, ZATCA plays a pivotal role in overseeing and managing the collection of Zakat and other tax-related matters in Saudi Arabia. The authority ensures compliance with zakat regulations and effectively administers the collection process.

Who is Subject to the Zakat Collection Law?

The Zakat Collection Law primarily applies to individuals and entities required to pay Zakat. This form of Islamic almsgiving is obligatory for those who meet specific eligibility criteria, which are determined by their wealth, assets, and income. The following groups are subject to this law:

Individuals: Zakat is mandatory for individuals who meet the criteria based on their financial standing, particularly for Muslims who possess the minimum wealth threshold and have held that wealth for a complete lunar year.
Businesses: Corporate entities are also required to fulfill their zakat obligations.
High-Net-Worth Individuals: Those with substantial wealth, investments, and assets are subject to Zakat.
Islamic Financial Institutions and Charities: These organizations are included as contributors to Zakat.
Zakat Collection Authorities: Entities that oversee the collection process also fall under the law’s jurisdiction.

Summary of the Zakat Collection Law’s Purpose

In summary, the Zakat Collection Law establishes a framework for the collection of Zakat, ensuring that both individuals and businesses contribute to the welfare of society in alignment with Islamic principles.

Royal Decree No. 17/2/28/8634, 1951: Legal Basis and Scope

The Zakat Collection Law, established under Royal Decree No. 17/2/28/8634, 1951, outlines the framework for the collection of Zakat, a form of almsgiving treated as a religious obligation in Islam. This law is essential for ensuring that both individuals and companies contribute to the welfare of society in accordance with Islamic principles. The law stipulates that the provisions of the aforementioned decree apply to individuals and companies that do not possess Saudi nationality. This inclusion emphasizes that the obligation to fulfill Zakat responsibilities extends beyond Saudi citizens, highlighting the inclusive nature of the law in promoting communal support.

Zakat for Saudi Nationals:

Conversely, Article 2 specifies that Zakat is to be collected from individuals and companies holding Saudi nationality in accordance with Islamic law (Sharia). This provision reinforces the idea that all citizens bear a responsibility to contribute to societal welfare through Zakat, which is calculated based on their wealth and assets. This continuity ensures that the principles of Zakat collection are consistently applied and enforced following the established guidelines. The final article mandates that the Decree be communicated to those responsible for its implementation. This provision is crucial for ensuring that the relevant authorities and entities are adequately informed about their roles in enforcing the law and facilitating the collection of Zakat.

Conclusion

The Zakat Collection Law serves as a foundational legal framework for the collection of Zakat in Saudi Arabia, emphasizing the importance of both Saudi nationals and non-Saudis in contributing to the community’s welfare. By establishing clear guidelines for the collection process, the law ensures compliance with Islamic principles while promoting social responsibility. As such, it plays a vital role in fostering a culture of giving and support within society.

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