On 14 January 2025, the Zakat, Tax and Customs Authority (ZATCA) issued a proposed amendment to Article No. 73 of the Zakat Collection Implementing Regulations (the Regulations) aimed at specifying the Zakat treatment of the deduction of the off-plan projects balances. The key changes are summarized below:
1. Provisions for deduction of the off-plan project balances
Balances for off-plan projects licensed by the competent authority are eligible for deductions from the Zakat-base based on the following formula, when the result of this formula is more than zero:
Deduction from base = Project balance at year end - Additions during the year
• The above formula applies to each project separately.
• In case the off-plan projects are classified as both current and non-current, deductions are first to be applied to the balance classified as non-current asset, and the remaining amount shall be applied to the balance classified as current asset.
• Sources of funding of the off-plan projects must align with the additions to the Zakat base rules, as stated in Chapter Three of the Regulations.
2. Compliance with Article No. 25 of the Regulations
This amendment reinforces compliance with Article No. 25 of the Regulations to ensure that sources of funding for off-plan projects are appropriately added to the Zakat base. To recap, Article No. 25 of the Regulations stipulates the rules for proportion of current liabilities added to Zakat base and/or non-current liabilities excluded from the Zakat base.
We encourage Zakat payers to take this opportunity to provide their valuable suggestions on the proposed amendment through the public consultation platform, Istitlaa, before the abovementioned dates.
For detailed discussions on how the proposed amendment may impact your business, please contact our Tax team: