Subjecting Net Profit to Zakāt in Saudi Law

This study aims to discuss a legal principle that has not been settled in Saudi tax tribunals, namely, the Saudi authority subjecting the adjusted annual net profit to zakāt when the zakāt base of the taxpayer is less than the adjusted annual net profit. Taxpayers prefer to deduct the assets from the zakāt base limiting the amount based on the relevant property rights. Hence, the adjusted net profit is not taken as a minimum for the zakāt base, rooted in certain Sharīʿah fatwās, which state that zakāt is not obligatory for money spent for purchasing assets when a year has not yet passed on these new assets. This study discusses the religious viewpoint by considering zakāt as one of the pillars of Islam, and, from a legal and accounting viewpoint, to propose enhancements for the Saudi legal environment to be more attractive to taxpayers.