A company's relationship with banking institutions, and its zakat and tax obligations, needs careful legal handling from financing agreements and accompanying guarantees through to compliance with Saudi Central Bank regulations for both conventional and Sharia-compliant financing, and ongoing obligations to the Zakat, Tax and Customs Authority.
A few situations come up repeatedly. A company negotiating a credit facility that needs its terms reviewed before signing. A group restructuring existing financing that needs the impact on current guarantees assessed. A company facing an inquiry or review from the Zakat, Tax and Customs Authority regarding its filings. Or an entity planning to issue sukuk or Islamic financing instruments that needs a structure compliant with both Sharia and Saudi law.
Financing matters are governed by Saudi Central Bank regulations applicable to licensed financing entities, while zakat and tax obligations fall under the VAT Law, the Zakat Law, and the Income Tax Law, overseen by the Zakat, Tax and Customs Authority. Zakat and tax treatment differs based on the ratio of Saudi to foreign ownership in the company, a detail worth reviewing carefully whenever ownership structure changes.
Engagements typically begin with a review of the company's current financing or tax position before recommending any structure or responding to an inquiry from the relevant authority. In financing matters specifically, we review the terms of guarantees and covenants attached to the facility carefully, since these terms often carry ongoing obligations beyond simple repayment.
We work alongside the company's accountants on tax and zakat matters, where the accountant handles technical calculation while we handle the regulatory and negotiating side with the relevant authority when needed.
For Sharia-compliant financing specifically, we review the structure to ensure compliance with the requirements of the Sharia financing entity alongside relevant Saudi regulations.
We help companies prepare their financial and regulatory files ahead of any audit from the Zakat, Tax and Customs Authority, reducing the likelihood of procedural violations that a simple prior review could have prevented.
For companies expanding their financing across more than one lender, we review the compatibility between different guarantee terms to avoid a conflict between obligations owed to each individual lender.
For companies where the financing is tied to specific commercial assets, this relationship deserves a parallel review under our real estate mortgage service if the collateral is property, or other guarantee arrangements depending on the nature of the asset. Companies that prefer Sharia-compliant financing benefit from a parallel review under our Islamic finance and takaful service, rather than treating conventional financing as the only option available to them.