How the Calculation Is Determined
The Saudi and Gulf shareholders' portion of company capital is calculated as zakat, while the portion of shareholders from other nationalities is calculated as income tax, a distinction depending directly on the company's actual ownership structure.
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Any change in the ratio between Saudi and foreign ownership needs immediate review of its impact on this calculation, since distribution between zakat and tax changes directly as a result.
Regulatory Basis
This calculation draws on the Zakat Law and Income Tax Law, overseen by the Zakat, Tax and Customs Authority.
How We Review This Calculation
The lawyers carefully review company ownership structure to precisely determine the ratio subject to zakat and the ratio subject to income tax, in coordination with the company's accountants who handle the technical calculation.
Who Needs to Review This Calculation
Companies with mixed ownership between Saudis and foreigners.
Companies planning an ownership structure change that needs the tax impact of that change assessed in advance.
The lawyers review this impact under the zakat and tax service before completing any ownership change, connecting that with a parallel review of any existing customs obligations if the company also operates in import or export.
Common Questions
How is zakat and tax calculated for a company with mixed ownership?
The Saudi and Gulf shareholders' portion is calculated as zakat and the foreign shareholders' portion as income tax, based on each party's actual ratio in capital.
Do you handle these calculations yourselves?
The lawyers work in coordination with the company's accountants, where the accountant handles the technical calculation and the lawyers handle the regulatory and negotiating side.
Practical Takeaway
The difference between zakat and tax depends precisely on ownership structure, not the type of activity or company size.
Any planned change in ownership structure deserves prior tax review to avoid surprises in calculation later.