Zakat, Tax and Customs Authority has invited the financial and regulatory sector to provide their feedback on the draft amendment of the executive regulation for Zakat collection, during the period from January 14 to 29, 2025. The project aims to add a new paragraph to organize the mechanism of calculating Zakat off-plan sale projects, commensurate with the nature of these projects.

Details of the proposed project

<The project is based on the addition of paragraph (3) to Article 73 of the Regulations, which addresses the zakat of real estate projects under construction. According to the new paragraph, the value of under-construction properties intended for sale, provided they are not offered for sale in their current state, or their cost of sales exceeds 25% per annum of their value shown in the financial statements for the Zakat year, will be deducted according to the following rules:

1.

1. Asset classification: Real estate must be among the non-current assets in the financial statements.

2.

2. Calculation of ratios separately: The proportion of each project is calculated separately.

3. Cost formula: The cost of sales ratio is calculated using the following formula:

(Exclusions at cost = beginning of period balance + additions during the year)

4.

4. Adjustment of ratios: The Authority reserves the right to review and adjust the ratio according to market conditions.

Additional provisions in the Article

The article also stipulates that if real estate under construction for sale is classified as inventory or current assets, it shall be deducted from the Zakat base when the controls in paragraph (1) are met, and current liabilities must be added in accordance with Article 25 of the Regulations.

Additional provisions in the article

Zakat treatment of off-plan sales projects

According to the new paragraph, Zakat for off-plan sales projects will be handled as follows:

Balance Deduction: Licensed projects are deducted from the Zakat pot based on the regulations in force in the Kingdom, using a formula that includes the balance of the project and the value of the additions.

Zakat deduction.

Separate calculation:

The formula is applied for each project independently.

Asset Classification: If part of the project balance is classified as current assets and part as non-current assets, the deduction begins with the non-current portion and continues with the current portion if necessary.

Add Sources of Funds: The formula is applied for each project separately.

Add Sources of Funds: The sources of funds for off-plan sales projects shall be added as stipulated in Chapter 3 of the Regulations.

Project Significance

This amendment comes as a regulatory step aimed at enhancing transparency and justice in the calculation of Zakat for real estate projects under construction, ensuring compatibility with the nature of the real estate market and its changing conditions.

The amendment comes as a regulatory step aimed at enhancing transparency and justice in calculating Zakat for real estate projects under construction.