Authority’s Method to Calculate Zakat Base

 

The Authority uses the indirect method (sources of funds method) to reach the zakat base. This
method is based on two basic procedures:

Add: External sources equivalent to the deductible assets
Deduct: The value of non-Zakatable assets and the value of the Zakatable assets.

Zakat base = Add – Deduct

● Reasons for adding to the Zakat base
– The deductible component, including obligations.
– Access to zakat assets financed through internal funds.

● Estimation of Zakat base
The obligations of the Zakat payer (external sources of financing) must be added at the Zakat base; assuming its priority in funding the items settled before internal sources of funding, in the following order:

1- External sources of funds (up to the maximum value of the assets settled).
2- Internal sources of funds.

Add:
> Capital.
> Advanced Revenue and Payments.
> First Year Reserves.
> Adjusted Net Profit / Net Fixed Assets.
> Any item taken at discounted rate.
> Retained Earnings.
> First Year Allocation.
> Profit Under Distribution.
> Change in Fair Value.
> Long-term obligations (maximum sum deducted from the zakat base).

Deduct:
> Net Fixed Assets.
> Capital Work in Progress.
> Intangible assets.
> Zakat Investments/ Investments in entities inside and outside the Kingdom for non-trading in accordance with the rules mentioned below.
> Net Value of Properties Under Development.
> Net Incorporation.
> Statutory Deposit of Insurance and Reinsurance Companies.
> Adjusted Net Loss Adjusted carry-over loss or as per the lists, whichever is less.
> Agricultural Inputs.