Zakat on stocks and real estate is one of the most pressing topics for investors and property owners in the Kingdom of Saudi Arabia. Many people own shares in listed companies or investment properties and wonder: Are they required to pay zakat? And how is it calculated? In this article, we provide you with a practical and simplified guide on the rulings of zakat on stocks and real estate according to the Zakat Bylaws issued by the Zakat, Tax, and Customs Authority (ZATCA).
First: Zakat on Stocks (Shares of Joint-Stock Companies)
The method of calculating zakat on stocks varies depending on the type of company issuing the shares:
1. Shares of Companies that Pay Zakat (Saudi Joint-Stock Companies)
Saudi joint-stock companies subject to the zakat system in the Kingdom pay zakat on behalf of their shareholders annually. Accordingly, you are not required to pay additional zakat on these shares, as the company itself pays zakat on its profits and zakatable assets. This is the general rule applied by ZATCA for years.
2. Shares of Non-Zakat-Paying Companies (Non-Saudi or Foreign Companies)
If you own shares in companies not registered in Saudi Arabia and do not pay zakat, you must calculate zakat yourself. The approved method is the net assets method, calculated as follows:
- Multiply the number of shares you own by the share price at the end of the year (Hijri year).
- Multiply the total market value by 2.5% (one-quarter of a tenth).
- Example: If you own shares worth 100,000 SAR, your zakat is 2,500 SAR.
Second: Zakat on Real Estate
The ruling on zakat for real estate depends on the owner’s intention at the time of purchase and actual use:
1. Real Estate Owned for Personal Residence
Property that you or your family reside in is not subject to zakat. This also applies to property rented out for long-term residential use.
2. Rental Properties (Real Estate Investment)
If you own a property and rent it out to generate monthly or annual income, zakat is due on the net rental income, not on the property’s value itself. It is calculated as follows:
- Sum the rental income received during the year.
- Subtract expenses (maintenance, utilities, management fees).
- If the net cash income reaches the zakat threshold, pay 2.5% of it.
3. Properties Held for Sale (Commercial Offerings)
If you purchase a property with the intention of selling it for profit (real estate speculation), this property is considered trade goods, and zakat is due on its full market value at a rate of 2.5% each Hijri year.
Third: What is the Zakat Rate? And When is it Due?
The zakat rate in the Kingdom is 2.5% (one-quarter of a tenth). It is calculated on wealth that has been held for a full Hijri year (haul). Zakat differs from tax — zakat is a religious obligation distributed to its rightful recipients, while tax goes to the state treasury.
Important note: Business owners and individuals registered with ZATCA submit
Annual Zakat declaration via the ZATCA electronic portal before the end of the fifth month of the year following the Zakat year.
Fourth: Practical Tips
- Keep your records: Record the value of your shares and real estate at the beginning and end of each Hijri year to facilitate Zakat calculation.
- Consult a specialist: If your investment portfolio is large or complex, it is best to consult a Zakat accountant or an audit firm.
- Use the Zakat calculator: ZATCA provides an electronic Zakat calculator on its official website zatca.gov.sa to simplify the process.
- Do not confuse Zakat with tax: Zakat is an act of worship and an independent obligation separate from value-added tax or income tax.
Frequently Asked Questions
Q: Is there Zakat on a car or the house I live in?
A: No, real estate owned for personal residence and a private car are not subject to Zakat. Zakat is due on surplus funds beyond basic needs.
Q: How do I know if a shareholding company pays Zakat on my behalf?
A: All Saudi joint-stock companies registered with ZATCA pay Zakat on behalf of their shareholders. You can verify this through the company’s annual disclosures or by contacting the investor relations department.
Q: If I have a rented property, do I pay Zakat on the full property value or just the rent?
A: You pay Zakat on the net rental income (rent received minus expenses), not on the property value itself. However, if the property is held for sale (as trading stock), Zakat is due on its full market value.
Q: When does the Zakat year (Hawl) begin?
A: The Zakat year is calculated based on the Hijri calendar. It begins from the date you own the Nisab amount (equivalent to 85 grams of gold or 595 grams of silver).
Note: This article is for informational purposes only and not a legal opinion. Please consult the Council of Senior Scholars or your Sharia advisor for precise guidance tailored to your situation.
