Overview
Saudi and Gulf shareholders' portion of the company is calculated as zakat, while foreign shareholders' portion is calculated as income tax, which requires careful review of ownership structure whenever it changes.
VAT carries separate periodic filing obligations distinct from zakat and income tax, and companies are subject to different registration and filing requirements based on their revenue size.
Regulatory Basis
These obligations fall under the Zakat Law, Income Tax Law, and VAT Law, overseen directly by the Zakat, Tax and Customs Authority.
Applicable zakat and tax rates vary based on the nature of the activity and ownership structure, and we review these details in coordination with the company's accountants who handle the technical calculation.
How We Handle Tax Matters
We first review the company's ownership structure to precisely determine the ratio subject to zakat versus the ratio subject to income tax, before submitting any filing or responding to an authority inquiry.
If the company receives an inquiry or review notice from the Zakat, Tax and Customs Authority, we handle the regulatory and negotiating side of the response in coordination with the company's accountants.
Who Needs This Service
A company with mixed ownership between Saudis and foreigners that needs the precise zakat and tax ratio applicable to it determined.
A company receiving an inquiry or review from the Zakat, Tax and Customs Authority that needs representation in responding to it.
A company planning an ownership structure change that needs the zakat and tax impact of that change assessed in advance.
Common Mistakes
Handling the zakat and tax regulatory side separately from ownership structure changes, even though any change in foreign ownership ratio directly changes tax treatment.
Delaying response to Zakat, Tax and Customs Authority inquiries, which can turn a simple inquiry into a broader review or late payment penalty.
Cost and Fees
An initial review of zakat and tax structure is priced as a fixed fee, while representation services in authority inquiries are priced separately based on the inquiry's complexity.
We work in coordination with the company's accountants on these matters, where the accountant handles technical calculation and we handle the regulatory and negotiating side.
We consistently see that the most common Zakat, Tax and Customs Authority inquiries our clients face don't arise from deliberate evasion, but from a simple change in ownership structure that wasn't reported to the Authority in time, or a mismatch between data filed in the zakat return and other data registered with the Ministry of Commerce, a mismatch that's avoidable with a simple periodic review before filing any return.
Additional Considerations
When ownership structure changes involve bringing in a new foreign investor, this connects with our foreign investment and MISA licensing service.
For companies in import and export, tax obligations connect with our customs, import and export service.
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, and we review this calculation carefully based on the actual ownership structure.
Do you handle responses to Zakat, Tax and Customs Authority inquiries?
Yes, we handle the regulatory and negotiating side of these inquiries in coordination with the company's accountants.