Saudi Zakat Donations and Charitable Projects

Apply the paid-donation route and the general expense controls

A charitable purpose does not alone establish an accepted Zakat expense. Zakat Collection Regulations Article 63(7) addresses donations paid to licensed entities within Saudi Arabia under the relevant laws. Article 62’s general expense controls and the actual supporting evidence must also be considered.

ZATCA’s Guideline on Modification of the Activity Result, November 2024, section 5.8, explains three donation conditions: actual payment, a licensed recipient inside Saudi Arabia and supporting documents. The recipient, timing and evidence each need their own conclusion.

Dariba recommendation: identify the actual legal recipient and the relevant licence before approving the expense treatment. A campaign name, a partner’s endorsement or the location of a beneficiary project does not by itself establish the recipient’s legal status.

Distinguish a paid donation from a pledge or accrued commitment

Section 5.8 requires payment within the Zakat year for the donation-expense route. It expressly distinguishes an unpaid accrued donation, a promise and an agreement to donate from an actual completed payment. The guidance covers both cash and in-kind donations.

For cash, the guide identifies bank-transfer or bank-statement evidence. For a donation in kind, it identifies evidence of receipt, including the transfer of furniture, assets or vehicles to qualifying organisations.

Dariba analysis: approval and settlement answer different questions. A board resolution may support authority for a donation without establishing that cash or an asset reached the recipient during the relevant year. Reconcile the expense entry, any donation payable and actual transfer so an unpaid commitment is not accepted merely because it was booked.

The different Article 63(9) treatment of created provisions should not be used to bypass the donation paragraph’s express paid conditions. The expense and provision guide explains the distinct routes.

Verify the recipient rather than assuming every local payment qualifies

Section 5.8 excludes donations to unlicensed recipients and identifies payments to natural persons as not qualifying through this route. A recipient being physically in Saudi Arabia is therefore insufficient. The licensed status and applicable donation-collection requirements still matter.

The guideline gives examples of qualifying recipient types, including appropriately licensed charitable, medical, educational and endowment entities, and government-approved donation platforms and funds. These are categories to verify, not a permanent whitelist of every organisation using a similar description.

Official example: section 5.12, Example 40, disallows SAR 803,000 donated to natural persons inside Saudi Arabia with a partner’s knowledge. The partner’s knowledge does not establish that the recipients satisfy Article 63(7).

Dariba recommendation: retain the recipient’s full legal name, relevant licence or approval evidence, donation purpose, payment record and receipt. Confirm the actual recipient of the payment where a platform, intermediary or campaign is involved; a familiar brand alone does not establish the legal route.

Separate a foreign recipient from a licensed Saudi recipient’s overseas project

Section 5.8 excludes donations paid to an entity outside Saudi Arabia. That is different from paying a licensed recipient inside Saudi Arabia which applies the funds to charitable work overseas.

Official clarification: section 10, Frequently Asked Questions, question 6, expressly accepts donations paid to licensed charitable organisations inside Saudi Arabia for their charitable projects outside Saudi Arabia. It explains that the licensed domestic recipient matters regardless of the use of the donation or the associated projects. The other payment and supporting-document conditions remain relevant.

Dariba analysis: the project’s country alone does not decide the Zakat result. Identify who legally receives the donation, whether that recipient qualifies and whether the actual transfer is supported. A direct foreign donation cannot be reclassified merely by describing it as connected with a Saudi campaign. An arrangement whose legal recipient is unclear needs its own fact review.

Use the official adjustment by reason and amount

Official example: section 5.8, Example 29, identifies four donation amounts: SAR 150,000 to an overseas non-profit, SAR 200,000 paid to a licensed domestic entity, SAR 600,000 paid to an unlicensed association and SAR 450,000 without supporting documentation.

The official adjustment is SAR 150,000 plus SAR 600,000 plus SAR 450,000, totalling SAR 1,200,000. The SAR 200,000 paid to the licensed domestic recipient is not part of that adjustment on the supplied facts.

The failure reasons are separate. A transfer document does not cure an unlicensed recipient. A licence does not prove the actual payment or amount. The official example’s results should be traced to these amounts and conditions rather than extended to every donation by an account label.

Document an in-kind transfer without inventing a valuation concession

Section 5.8 recognises that donations can be made in kind and calls for evidence of the actual donation, including the receipt. Establish the asset or goods transferred, the actual recipient, transfer date and recognised expense with the relevant accounting and statutory support.

Dariba recommendation: reconcile the transfer documentation and recipient acknowledgement to the asset or inventory records. The existence of an in-kind route does not establish a general market-value uplift, an extra deduction in addition to the same recorded expense or an automatic deduction of a still-held asset from the closing base.

VAT treatment, including any supply or input-tax consequence, is a separate question. Acceptance of the Zakat donation expense does not itself establish a VAT exemption or determine the recipient’s own Zakat status.

Distinguish a donation from a supported commercial promotion

Official example: section 4.6.3, Example 17, accepts SAR 35,000 of client promotional gifts under an approved marketing plan with invoices and supporting documents. This is an activity-expense example. It does not waive Article 63(7)‘s recipient requirements for an actual charitable donation.

Dariba analysis: establish what the business actually provided and why. A genuine advertising or promotional cost needs its own business and evidence analysis; simply moving a donation into a marketing account does not change the underlying facts. Conversely, not every supported client promotional item should be rejected solely because it is called a gift.

Maintain a schedule identifying the actual category, recipient, licence where relevant, payment or transfer, amount, source provision and adjustment. The expense-evidence guide explains the wider documentary tests; the profit guide connects the accepted or denied expense to the activity-result bridge and separate final-base analysis.