Tax Alert: Amendments to clarify Zakat treatment

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On 13 June 2025, the Official Gazette “Umm Al-Qura” published Ministerial Resolution No. 1248, dated 11/10/1446H (corresponding to 9 April 2025), amending Article 73 of the Implementing Regulations for Zakat Collection. This amendment introduces specific Zakat treatment for off-plan real estate projects and is effective from the date of its publication for fiscal years commencing on or after 1 January 2025.

On the same day, Umm Al-Qura also published Ministerial Resolution No. 1463, dated 08/12/1446H (4 June 2025), which extends the timeline for submitting requests under MR No. 947 for the retrospective application of the new Zakat regulations to prior fiscal years.

Key highlights and amendments:

1) Zakat deductibility of off-plan projects (Article 73)

Earlier provision: Article 73 of the Zakat regulations previously addressed the deductibility of real estate projects under construction intended for sale after completion of construction, subject to certain conditions. The earlier provisions did not address the deductibility of the “off-plan” projects.
New provision:

· The amended Article 73 now introduces eligibility criteria for deduction of the “off-plan” projects licensed by the relevant authorities from the Zakat base. The allowable deduction is calculated as follows:

Deduction = Closing project balance – Additions during the year (Deduction applies only if the result is positive)

· The above formula shall be applied for each project separately. The amendment restricts the deduction to the extent of the opening balance, which is an exception to Article 17 of the new Zakat regulations which requires Zakat payers to use closing balance reported in the financial statements for calculating the Zakat base.

· The amended provision also provided the methodology for deductibility of non-current and current balances of the “off-plan” projects, subject to the conditions of offering the sources of funds and related current liabilities to Zakat base. We expect ZATCA to issue an explanatory guide on applying such conditions.

2) Extended deadline for the retrospective application of new regulations (MR No. 947)

· Earlier provision: We refer to our alert dated 18 February 2025, explaining that Zakat payers may apply the provisions of the new Zakat regulations (issued under MR No. 1007 on 29 February 2024) on fiscal periods prior to 1 January 2024, within the deadline of 30 April 2025.

· New provision: The deadline has now been extended to 31 August 2025, giving Zakat payers additional time to request retrospective application of the new Zakat regulations for periods preceding 1 January 2024.

Key takeaways for Zakat payers

Zakat payers should review existing off-plan project balances to determine whether they meet the deduction criteria under the amended Article 73.
Zakat payers are encouraged to evaluate the potential benefits of applying the amended provisions for fiscal year 2024 or earlier. If beneficial, a formal request may be submitted to ZATCA for the revision of the Zakat return in eligible cases.
Zakat payers can leverage the extended deadline to assess whether applying the new Zakat regulations to fiscal periods preceding 1 January 2024 would be advantageous.

How KPMG can help

Zakat payers wishing to explore the potential benefits of the amendments related to Zakat treatment and the extended deadline for applying the new Zakat regulations are welcome to contact us for further assistance.