It is common for companies to lose track of calculating Zakat as they grow and expand. Zakat is an Islamic form of charity and is one of the five main pillars of Islam. It applies to all types of wealth, from farming and crafting to major stocks, which means Saudi companies must abide by it and make it part of their financial equation every year.
Businesses are a form of what Islam identifies as trade; they offer products and receive money in return. As a result, Zakat is imposed on these businesses, and its calculation is important to consider by their finance departments. Your company’s Zakat value is calculated by adding the overall value of whatever products you have in stock since the last time you paid Zakat to the current assets, which are the overall existing amount of money on the day of Zakat payment, plus your accrued income, which is money your company is owed. 2.5% of that sum is your company’s Zakat.
For businesses that do not sell their products, like companies that develop buildings for rent and not for sale, Zakat is the current assets, plus the accrued income, divided by 40. The outcome is the actual value of Zakat. There are corporations where the product they ‘sell’ is not tangible; some companies might sell services. For those, the amount of existing money, plus the amount of money they are owed is added up and divided by 40, that outcome is their actual Zakat value. Zakat does not need to be paid for the value of furniture and other possessions within the company.
Abdulaziz: I think the real art is managing client expectations. We, at Proven, really put the client’s needs as our ultimate focus. Everything is derived from this on point. Making sure we manage client expectations can be challenging, but at the core, it’s about having open communications with our clients and making sure we work as a partner with them to solve their issues. We have an ongoing regiment to make our service delivery model more flexible to meet each client’s requirements. Our processes are identifying the client needs and subsequent service delivery elements. We then prioritize execution based on the urgency, and the client relationship team manages the expectations around this delivery.
The terms ‘Nissab’ and ‘Hawl’ always accompany Zakat. As businesses develop into digital entities, Arabic terms written in English come up in everyday business among GCC corporations. ‘Nissab’ means the value when and if passed, Zakat must be paid. It is the value of 85g of gold for individuals, however it does not affect the value of Zakat mentioned above for companies. ‘Hawl’ is the time of the year Zakat is paid; that is once every Hijri calendar year. Your wealth is required to have been an excess for an entire Hijri calendar year, and it is advised to consult with experts, especially for special cases.