A Saudi family group brings in a London partner for 30% of a Riyadh trading company. Everyone signs, the CR is updated, and nobody thinks about tax until the first year-end. Then the finance manager discovers the company doesn't file "a zakat return" or "a tax return". It files both, inside one declaration, on two different bases.
This is where we see the most rework in December and January. The rules are manageable once they're laid out. Figures below are as of October 2026.
Who pays what
ZATCA looks at who owns the company, not at the company itself. The share held by Saudi and GCC owners pays zakat. The share held by everyone else pays corporate income tax at 20% (ZATCA simplified income tax guideline).
The part people miss is "directly or indirectly". If your Saudi shareholder is itself a Saudi company that is 40% foreign-owned, ZATCA looks through it. Part of what looks like a Saudi share on your register is taxed as foreign. Ownership is also tested at the end of the year, so a share transfer recorded on 28 December changes the split for the whole year (ZATCA zakat collection guideline).
Each side has its own base
Corporate tax is charged on taxable income: accounting profit adjusted for disallowed costs, depreciation rules and so on.
Zakat is charged on the zakat base, which is closer to net equity: capital, reserves, retained earnings and long-term funding, less certain long-term assets. The base can't drop below adjusted net profit. The rate is 2.5% for a Hijri year. A company on a Gregorian year applies 2.5% divided by the days in the Hijri year, multiplied by the days in its own year, which works out at roughly 2.578% (ZATCA zakat guideline).
A simple example
These numbers are illustrative only. Take the company above, 70% Saudi and 30% UK-owned, on a calendar year.
Say taxable income for 2026 comes to SAR 4 million. The foreign share is 30%, so tax is 20% of SAR 1.2 million, or SAR 240,000.
Now say the zakat base for the whole company is SAR 10 million. The Saudi share is SAR 7 million, and zakat at about 2.578% comes to around SAR 180,400.
Notice that a profitable but thinly capitalised company pays mostly tax, while a heavily capitalised one with modest profit pays mostly zakat. Shareholders are often surprised by which side ends up larger, so it's worth modelling before the board approves dividends.
Deadlines and the cash side
Both parts are filed and paid within 120 days of year-end. For a 31 December 2025 year-end, ZATCA set the deadline at 30 April 2026 (ZATCA announcement, Arabic). There is no extension.
If the prior year's income tax was SAR 2 million or more, the tax side also carries advance payments. Each is 25% of last year's tax less withholding, due at the end of months six, nine and twelve, and none is needed where the instalment would be under SAR 500,000 (ZATCA income tax regulations). Calendar-year companies have one due this December.
Late filing costs the higher of 1% of revenue, capped at SAR 20,000, or 5% to 25% of unpaid tax depending on the delay. Late payment adds 1% for every 30 days.
What to sort out before 31 December
- Confirm the ultimate ownership of every corporate shareholder, not just the names on the CR.
- Hold any share transfer until you know which side of year-end it should land.
- Map the trial balance to both bases now, so the auditors and the return use the same numbers.
- Check whether a December advance payment is due and that the cash is set aside.
FCG's Virtual CFO team advises mixed-ownership companies on the split, models the zakat and tax cost ahead of year-end and coordinates with your auditors. Audit and accounting work is delivered through our associate firm, Gadwalah CPA.
Read more about our Virtual CFO service, or book a free consultation and we'll go through your position with you.
