Saudi Zakat Partner Loans and Receivable Deductions

Partner financing has different Zakat treatment on the borrower’s and lender’s sides. Current Articles 30–31 distinguish legal form, terms, ownership and the recipient’s Zakat status. Neither all shareholder loans are equity nor a related-party receivable is always deductible is a reliable substitute for those tests.

Identify the direction and actual nature of the balance

Current amended Arabic Zakat Implementing Regulations Article 30, p. 20, addresses partners’ credit balances owed by the payer; Article 31, p. 21, addresses the relevant debit loans/receivables. Identify which entity actually owes and which holds the asset.

ZATCA’s Guideline for Zakat Base Additions, version 1 January 2025, sections 2.4–2.5, pp. 27–34, explains that partner balances can arise from funding, payments on behalf and specified commercial dealings, under different account names.

Dariba recommends retaining the underlying transactions and capacity of the parties. A ledger caption due to related parties does not establish that every balance is the same kind of partner financing or should receive the same classification.

Apply the listed-company credit-loan route

Article 30(1) treats the stated partner loans in listed companies according to the financial-statement classification. This differs from the conditional route for the stated non-listed capital companies and partnerships.

Official Additions Guideline Examples 6–7, pp. 30–31: a partner current-account balance without specified repayment/return terms is reclassified as equity in the stated LLC case. Changing the example to a listed joint-stock company changes the route to the financial-statement classification.

The example’s current-liability conclusion should not be broadened into a rule that no current liability can ever be added. Article 29(2)‘s separate cases and the other applicable provisions still require consideration.

Test all five conditions in the non-listed route

Article 30(2) treats the relevant loans in non-listed capital companies and partnerships as liabilities where all stated conditions hold: financial statements approved by a Saudi licensed accountant, liability classification, an identified repayment period in the financing contract, market-consistent return and no full control by a single party of the specified kind.

If those conditions are not met, the provision treats the partner loans as equity. A repayment date and a market rate alone are therefore insufficient if another condition fails.

The Arabic term for capital companies should not be read as restricting the provision to securities brokers simply because one English translation uses securities companies. Read the actual legal form and controlling Arabic text together.

Preserve the single-owner rule despite commercial terms

Article 30(3) treats owner loans in one-person companies and sole establishments as equity, added on that basis. The legal-form/ownership route cannot be ignored merely because an agreement resembles a third-party loan.

Official Additions Guideline Example 9, p. 34: a single-member company’s SAR 9 million owner financing has a three-year repayment term and market-consistent return. The guide nevertheless treats it as equity under the stated single-owner route and removes it from its previous classification.

Dariba analysis: obtain the actual ownership before modelling how a contract’s interest or repayment wording affects the base. Reclassification can affect liability limits and the maximum measure; do not keep the amount in both equity and non-current debt.

Classify mixed partner accounts by their stated facts

Official Additions Guideline Example 8, pp. 32–33: the guide distinguishes the specified purchases, cash financing, payments on behalf and unpaid distribution balances. The SAR 4,003,000 financing has a twelve-month repayment term and market return and is treated as a liability on the express assumption that the other regulatory conditions hold.

The other stated partner balances and unpaid profits receive their specified equity-equivalent treatment. This is not a general exemption for every twelve-month loan or every trade payable; the example’s facts, conditions and separate unpaid-distribution rule matter.

Dariba recommends analysing each material component rather than netting or reclassifying the entire related-party ledger in one entry. Keep the contract and actual capacity supporting the relevant category.

Apply the exclusions and conditions for debit-loan deductions

Article 31(1)–(2) excludes the stated partner loans/equivalents to listed companies and to debtors not subject to ZATCA Zakat collection. A borrower paying corporate income tax does not automatically provide the lender with this Zakat deduction.

Article 31(3) provides the relevant non-listed capital-company/partnership route with the grantee’s financial statements, no identified contractual repayment period, a non-market-consistent return and the specified full control by the payer. These are the actual stated conditions; do not replace them with the opposite market-loan terms used in Article 30(2).

Article 31(4) separately addresses the stated owners’ debit loans in one-person-company/sole-establishment cases where the grantee is registered with ZATCA and subject to collection. Match the actual route and recipient facts before assuming a deduction.

Use the receivable example without creating automatic symmetry

The Zakat General Guideline, first version October 2024, section 5.3.4.1, Example 86, pp. 233–234, describes the stated SAR 17 million current related-party receivable and its corresponding equity treatment at the subsidiary, finding the deduction conditions met on those facts.

The current-asset deduction can require Article 25 correction and affect the permitted liability-addition limit. It is not enough to record the asset deduction and omit its corresponding base consequences.

Dariba analysis: the borrower’s classification is useful evidence, but not an independent guarantee that every lender’s Article 31 conditions are satisfied. Reconcile both sides, registration/subjection and the actual loan terms. Article 33’s rule for other debit loans and Article 34’s no-offset calculation also remain relevant.

Do not add a non-current classification condition to every debit-loan route

Official clarification: the Guideline for Deduction Items from the Zakat Base, first edition July 2025, section 4.2, question 3, confirms that a partner debit loan can qualify while classified as a current asset if Article 31’s actual conditions are met. Non-current classification is not an additional universal condition for this deduction.

The same guideline, section 3.5.1, distinguishes a loan from an equity investment even where the lender presents the financing within an investment balance. Official evidence must establish an actual investment contribution before the financing is treated through that different route. An accounting grouping alone does not remove the Article 31 tests.

Dariba recommendation: establish the legal funding, borrower, contractual terms, ownership and actual classification. Apply Article 25 where a current asset is deducted or a non-current asset is not deducted. Do not reclassify the item in a tax schedule simply to avoid the relevant correction.

Apply the short-term market-loan example on its actual facts

Official example: section 3.5.1, Example 27, concerns SAR 3 million due from a partner, classified as current. Its contract matures after seven months and carries a 0.3% return aligned with the market in that example. The guide denies the deduction because the repayment-term and return conditions are not met. It makes no placement correction for that item because it remains a non-deducted current asset.

The stated 0.3% is an example fact, not a prescribed market rate or Zakat percentage. The deduction fails on the actual Article 31 route; current classification alone is neither its reason for failure nor proof of eligibility. An apparently commercial loan can have different borrower-side and lender-side results under the distinct provisions.

Preserve the full-control condition where an example uses different ownership facts

Current Arabic Article 31(3)(d) expressly includes full control of the recipient entity among the stated conditions. The deduction guideline’s section 3.5.1, Example 28, nevertheless accepts the stated SAR 4,915,175 loan to a 60%-owned limited liability company, while excluding SAR 7,372,763 due from a listed company. The example assumes other conditions are met, but does not explain how its 60% fact satisfies the current Arabic full-control wording.

Dariba analysis: the 60% example should not be converted into a statutory ownership threshold or treated as removing paragraph (3)(d). Apply the controlling Arabic conditions; obtain focused authoritative clarification where a proposed deduction depends on that differing example. The listed-company exclusion remains a separate Article 31(1) boundary.

Nor does non-current presentation create a deduction. Example 28 expressly requires the relevant placement correction for its non-deducted non-current listed-company loan. Asset classification, legal eligibility and the linked liability adjustment must each be resolved rather than allowing one favourable fact to determine all three.

Keep financing, ownership and both entities’ evidence together

Retain the contract, repayment/return terms, legal forms, ownership/control, relevant audited statements, borrower registration/subjection, actual classifications, deduction support and the removal from any previous category.

The additions guide and receivables/set-off guide connect the remaining calculation rules. Withholding, VAT, transfer pricing and income-tax deductibility have their own tests; this classification does not settle them automatically.

Dariba recommends reviewing a partner balance when terms, ownership or entity form changes. A historic tax code or identical journal entry on both sides is less persuasive than the current route and evidence required by Articles 30–31.