Zakat and Taxes: Your Guide to Financial Compliance

Is Zakat a tax?

No. Zakat and tax are two separate obligations in Saudi Arabia. Both are administered by the same authority — ZATCA, the Zakat, Tax and Customs Authority — which is why the two are often talked about together, and sometimes get shortened to “Zakat tax” in everyday conversation. But they are assessed differently, on different bases, and a company’s bill for each can be very different.

What is the difference between Zakat and tax?

The cleanest way to think about it is ownership:

• Zakat applies to the share of a company owned by Saudi and GCC nationals. It is calculated on the company’s Zakat base — broadly, net worth adjusted for items such as fixed assets and long-term investments — at a fixed rate set by ZATCA.
• Income tax applies to the share of a company owned by non-Saudi/non-GCC parties. It is calculated on taxable profit, not net worth.
• VAT and withholding tax sit outside this split — they apply to transactions (sales, cross-border payments) regardless of who owns the company.

A company with mixed Saudi and foreign ownership is usually assessed for both Zakat and income tax at the same time, split proportionally between the two, on the same set of financial statements.

What is “Zakat tax”?

There is no single tax officially called “Zakat tax” in Saudi regulation — the phrase is a popular shorthand people use because Zakat and tax are collected through the same authority and often discussed in the same breath. If you see the term used online, it almost always means one of two things: Zakat itself, or the combined Zakat-and-tax compliance obligations a company has to ZATCA.

Does a foreign-owned company pay Zakat or tax?

Both, in proportion to ownership. If a company is 60% Saudi-owned and 40% foreign-owned, the 60% share is assessed for Zakat and the 40% share for income tax — on the same underlying financial statements, filed together. Getting this split right, and getting the underlying Zakat base calculated correctly, is where most of the technical work sits.

How Entry Post CPA helps

Entry Post CPA (SOCPA Accounting & Auditing Practice License No. 933) advises companies in Riyadh on Zakat and tax compliance under ZATCA, including Zakat base calculations, VAT, withholding tax, and ZATCA e-invoicing readiness — led directly by the firm’s partners rather than handed off to a junior team. See the full ZATCA / Tax service page for more detail, and the zakat return & certificate page for zakat filing.