How to calculate estimated zakat for the year 2023 AD

Do you know how to calculate estimated zakat for the year 2023? To learn about the most important points related to discretionary zakat and its calculation for companies and institutions

and to object to it and the most important frequently asked questions,

we have reviewed it in our article.

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What is discretionary zakat?

Discretionary zakat: It is a type of zakat in Islam.

It is a specific percentage of wealth or money that is estimated and calculated based on its estimated value, instead of waiting for agricultural development, livestock production, or actual monetary gain to occur.

The estimated zakat percentage is usually determined based on the historical average production or revenues in the region or country in question.

Calculating estimated zakat

To learn how estimated zakat is calculated, see our article How to calculate estimated zakat.

Calculating estimated zakat depends on several factors, and the basic steps for calculating it can be summarized as follows:

1. Determine which assets are covered: You must first determine which assets are subject to discretionary zakat. This can include money, investments, and fixed and variable assets that you own.
2. Determine the zakat percentage: You must know the estimated zakat percentage that applies to the covered assets. This percentage may vary from one region to another or from one country to another.
3. Calculating Zakat: Once you know the percentage, you can calculate the estimated zakat simply by multiplying the estimated value of the assets by the zakat percentage.
4. Distribution of Zakat: Discretionary Zakat must be distributed to the poor, needy and vulnerable people in society. You can distribute them based on local priorities and needs.

For example, if the rate is 2.5% and you have $10,000 in assets, the estimated zakat would be 10,000 x 2.5% = $250.

Among the most important related articles:

_ The executive regulations for collecting zakat, the most prominent 4 amendments

_ Collection of Zakat Ministerial Resolution No. 58705

_ Types of zakat and its conditions 2023

Objection to discretionary zakat

Objection to discretionary zakat can arise for several reasons, and this depends on individual, social and legal circumstances.

Here are some common reasons why someone could object to discretionary zakat:

1. Objection to the percentage: Some people may object to the estimated zakat percentage that has been determined because they believe it is exaggerated or unfair. This objection could give rise to a claim to change or modify the ratio.
2. Concern about use: Some people may be concerned about how the money collected from discretionary zakat will be used.
3. Local Zakat Laws: In some cases, there can be questions about how discretionary zakat laws are implemented in a particular country.
4. Various religious trends: Religious opinions regarding discretionary zakat may differ between jurists and religious scholars. Some people may follow different religious orientations that lead to their objection to this type of zakat.
5. Objection to the obligation of zakat: Some people may not be convinced that zakat is obligatory in general, whether it is obligatory or discretionary. They could have an objection to the concept of zakat itself.

A special declaration for zakat taxpayers is discretionary

A declaration for discretionary zakat taxpayers can be a legal document submitted by taxpayers who are subject to payment of discretionary zakat.

Here is what may be included in a declaration for discretionary zakat taxpayers:

1. Taxpayer Information: Specific personal information of the taxpayer must be included, such as full name, address, and ID number if necessary.
2. Assets included: The assets for which Zakat will be calculated must be estimated on an estimated basis. These assets must be clearly stated, whether they are cash, real estate, investments, or others.
3. Zakat percentage: The estimated zakat percentage that will be applied to the assets must be determined. This percentage must be in accordance with local legislation, laws and Islamic law.
4. Time period: The time period that the estimated zakat will cover must be determined. Zakat is usually given annually, but different time periods can be determined depending on the need.
5. Signature: The taxpayer must officially sign the declaration to confirm his commitment to paying the estimated zakat.
6. Additional terms: The document may contain additional terms regarding other details such as methods of paying zakat or directions regarding distribution to the needy.

How to estimate zakat

In our article, we will review the method of calculating estimated zakat. Estimating zakat in Islam depends on the type of assets and wealth you own, the laws of zakat in your country, and Islamic law.

Estimation of Zakat al-Fitr

Estimating Zakat al-Fitr depends on the amount of basic food that a person eats on the day of Eid. Mostly, the amount of Zakat al-Fitr is determined by weight and not by monetary value.

What is the ruling on estimating zakat?

Estimating zakat is considered legal and legitimate in some cases and circumstances, but its ruling depends on the context, Islamic law in force in your country, and local religious guidelines.

Here are some important points about the ruling on estimating zakat:

• Corner zakat and discretionary zakat: There are two main types of zakat in Islam.

1. Corner zakat is the zakat that is imposed on actual accumulated wealth that can be measured accurately, and it is legally obligatory.
2. Estimated zakat is a specific percentage imposed on assets based on an estimate of their value.

• Local Laws: The ruling on estimating zakat can vary from one country to another, as it depends on local legislation and the cultural and religious context.

In some countries, discretionary zakat can be part of the tax system and is mandatory.

In other cases, it can be optional and left to individuals.

• Sharia objectives: Zakat must be assessed flexibly and fairly and in a way that achieves the Sharia objectives of zakat, which are to support the poor, the needy and the vulnerable in society and improve their conditions.
• Consultation and approval: In many cases, it is recommended that zakat be estimated in consultation with Sharia scholars and financial experts to ensure that it is done in accordance with Sharia principles and local laws.

How to calculate estimated zakat and income in Saudi Arabia

In general, zakat and income in the Kingdom of Saudi Arabia are calculated as follows:

• Zakat calculation:

1. Assets covered: The assets that are subject to zakat in the Kingdom must be determined. They often include cash, investments, real estate, and businesses.
2. Zakat rate: The zakat rate in Saudi Arabia is 2.5% of the total value of assets. This percentage must be multiplied by the total value of assets to calculate the zakat amount.
3. Zakat calculation: The zakat amount is calculated simply by multiplying the total value of assets by the zakat percentage. For example, if your assets are worth 100,000 riyals, the zakat amount will be 100,000 riyals x 2.5% = 2,500 riyals.
4. Distribution: The amount of zakat must be distributed to the poor, needy and vulnerable people in society.

• Income Calculation:

1. Personal Savings: Personal income should be calculated from wages, dividends, bonuses, investment returns, and other funds.
2. Deductions and Expenses: Certain legal deductions and expenses may be provided to mitigate the amount of taxable income.
3. Calculating taxes: If you are eligible for zakat on income in Saudi Arabia according to local laws, you must calculate and pay the taxes due on the income.
4. Submitting reports: You must submit periodic tax reports to the competent tax authorities in Saudi Arabia and comply with all legal obligations.

Method of calculating zakat and income for institutions

Calculating zakat and income for institutions differs from calculating zakat and income for individuals, as the procedures are more complex and include detailed financial estimates and reports.

Here are general steps for calculating zakat and income for organizations:

Estimating revenues and expenses:

The organization must accurately estimate its revenues and expenses. This includes revenues from sales, services, investments,

and any other source of income, as well as a detailed breakdown of expenses such as production costs, wages, rents, taxes, etc.

• Calculating net profit: Calculate the organization’s net profit, which is the difference between revenues and expenses. Net profit is the income that an enterprise can add to capital.
• Estimating assets: The value of the assets owned by the organization must be estimated, such as real estate, stocks, cash, and fixed assets.
• Zakat calculation: According to the zakat laws in the country, the percentage of zakat on assets must be estimated.

1. In some cases, zakat is estimated at a fixed rate on total assets.
2. In other cases, there may be variable percentages depending on the type of assets.

• Preparing a financial report: Prepare an accurate financial report that includes the necessary information about revenues, expenses, assets, liabilities, net profit, and zakat due.
• Distribution and Reporting: Local laws may require the submission of the financial report and payment of zakat at a specific time to the tax authorities or relevant authorities.

Zakat must also be distributed to those eligible in accordance with local laws and regulations.

• Compliance and Audit: It is always preferable to consult professional accountants or tax accountants when you deal with CFOONLINE, the authorized financial office, to ensure full compliance with local tax laws and estimates.

Zakat for individual institutions

Zakat on individual institutions includes the zakat that must be paid by individuals who own their own institutions or businesses.

Here is information on how to calculate zakat for individual institutions:

1. Estimating assets: The owner of the institution must estimate the value of the assets he owns, including cash, real estate, stocks, fixed assets, and any other assets. The value of these assets is calculated at the current market value.
2. Calculating liabilities: The financial obligations and debts that must be paid by the organization must also be estimated.
3. Calculating net profit: The organization’s net profit must be calculated by subtracting liabilities and expenses from revenues and returns. Net profit is the portion of income that can be taken out to pay zakat.
4. Zakat rate: In the Kingdom of Saudi Arabia, the zakat rate on individual institutions is usually 2.5% of the net value of assets.
5. Zakat calculation: To calculate the amount of zakat due, the net value of assets must be multiplied by the zakat percentage. For example, if the value of net assets is 100,000 Saudi riyals, the zakat amount will be 100,000 x 2.5% = 2,500 Saudi riyals.
6. Reporting and Payment: Under the laws in Saudi Arabia, the business owner must submit periodic tax reports and pay the amount of zakat due on time to the tax authorities.
7. Distribution to the needy: A portion of Zakat should also be distributed to the needy, poor, and vulnerable people in society according to local priorities and needs.

How to calculate zakat for companies

Calculating zakat for companies requires specific procedures and accurate estimates, and these procedures may differ from one country to another according to local legislation and tax laws.

Corporate zakat calculation xls

There are many files ready to calculate zakat that you can download directly from the official websites of the country in which you reside.

Zakat calculation program

Zakat calculator software is a tool that helps you calculate and pay the zakat due on the money and property that you own and deal with in accordance with Islamic principles and rules.

The calculation of zakat depends on the total net wealth you possess and the extent to which it achieves the minimum required to pay zakat.

Zakat and income fees on the commercial register

Zakat and income fees on the commercial register vary from one country to another and depend on the legislation and tax laws in force in each country.

There is usually a system for filing tax returns and paying duties and taxes on business activities.

This involves providing specific information about a business’s income, profits, expenses, assets and liabilities. Based on this information, the zakat and taxes due are calculated.

The most important frequently asked questions about the method of calculating estimated zakat for the year 2023 AD

• What is the minimum zakat amount for my estimated taxpayer?

The minimum is (500) Saudi riyals.

• Does the Authority have the right to calculate Zakat based on financial data obtained from sources other than those mentioned in the guide if they differ from the data or information the Authority has?

The Authority has the right to calculate Zakat based on any information available to it through its sources or any other source that can be relied upon for data and information.

• Should individual establishments that have a commercial register and commercial books submit a declaration based on the commercial books

or according to the rules for calculating the estimated zakat of taxpayers?

Establishments that have commercial books must commit to submitting a zakat return based on the financial statements and commercial books.

• What establishments are subject to the discretionary zakat of taxpayers?

Any establishment that does not have commercial books that show the reality of its activity and is not obligated to issue financial statements.

• Is the taxpayer required to submit the estimated zakat return?

The Authority, based on the data and information available to it, issues the zakat declaration immediately after the end of the fiscal year without the need for the taxpayer to submit a zakat declaration.

• Does the taxpayer have the right to object to the Authority’s assessment?

The taxpayer has the right to object to the Authority’s assessment within (60) days from the date of his notification of the Authority’s assessment.

You may also be interested in:

_Common zakat questions in Saudi Arabia for the year 2023 AD

Frequently asked questions about zakat on financing activities

• Do insurance companies and other financial companies whose work is regulated under the supervision of the Capital Market Authority, such as financial brokerage companies,

fall under the umbrella of the rules for calculating zakat on financing activities?

According to the definition of financing activities mentioned in the first of the rules for calculating zakat on financing activities, which stipulates that:

Banks and finance companies licensed by the Central Bank of Saudi Arabia, the entities mentioned in the question are not subject to these rules.

• What percentage is used for the amount of zakat according to the rules for calculating zakat for financing activities?

According to the executive regulations for zakat, the zakat percentage for the taxpayer who uses the Gregorian year is approved by dividing (2.5%)

by the number of days in the Hijri year (354 days) multiplied by the number of actual days for the taxpayer’s zakat year.

If the adjusted net profit is the zakat base, the zakat rate (2.5%) is approved.

• If the taxpayer is a mixed company – Saudi and non-Saudi partners – and there is a change in ownership percentages during the year,

how are the sources of funds calculated for the purposes of the zakat calculation rules for financing activities?

The ownership percentage is approved for the purposes of these rules as at the end of the zakat year, but in the event of a change in the ownership percentages during the year,

the percentage of the Saudi partner subject to the zakat of these rules is calculated based on the number of days in proportion and proportionality.

• In the event of cessation of activity or liquidation, how is zakat calculated for the purposes of these rules?

In the event that the company is liquidated or its activity ceases during the zakat year, in accordance with the rules and regulations in force at the Central Bank of Saudi Arabia,

zakat is not calculated according to the equation mentioned in the rules.

• How is the maturity date – less or more than one year – determined for the items of assets and liabilities mentioned in the rules?

In general, items of assets and liabilities are classified in the financial statements based on the operational cycle and the extent to which the assets can be consumed, used or realized during or after the next (12) month operational cycle.

Regarding obligations, it depends on the company’s ability to fulfill its obligations during or after the next operational cycle.

Accordingly, it is necessary to have a special system and supporting documents, including the certified external auditor’s report on the financial statements

of the bank and financial companies, to approve the classification of the bank’s items and obligations in their financial statements.

• Are deposits considered among the sources of funds subject to zakat according to the rules?

There are two types of deposits:

1. Fixed-term: We look at its term. If it is more than a year, it is considered a source of funds, and if it is less, it is not counted.
2. Non-term: Indefinite-term deposits are not considered sources of funds subject to zakat according to the rules of zakat on financing activities.

• Regarding savings accounts, will they be treated as fixed-term deposits and therefore will they be among the sources of funds subject to zakat?

If the savings accounts have a term of one year or less, they are not considered among the sources of funds subject to zakat. If they are a year or more,

they are treated as fixed-term deposits and added to the zakat base within the sources of funds subject to zakat.

• If the mortgage was executed on assets other than real estate, such as investments in shares, and they were transferred to the bank,

will the same applies to real estate and be deducted from the pool?

In this case, these shares will be considered investments and therefore treated as such.

• What is the Authority’s method for zakat on investment in government bonds for financing activities?

As for financing activities, they are considered non- Zakatable assets, regardless of their term, and therefore the taxpayer will not submit a special declaration,

provided that the bank fills out the declaration and the table for the instruments correctly and places the instruments in their correct place within the declaration.

Among the most important articles that others are searching for:

_Conditions for the obligation of zakat 9. Learn about them

_ Zakat calculation in Saudi Arabia 1444 AH

_Zakat base, comprehensive guide 2023 AD

Conclusion:

In conclusion, we have reviewed for you the most important points related to the method of calculating estimated zakat for the year 2023 AD in Saudi Arabia, especially other Arab countries.

At CFOONLINE, we are pleased to provide our various accounting and financial services in a professional manner, as we stay with our clients step by step to achieve success.

Most important sources:

wikipedia