Saudi Arabia: Clarification on Accounting Treatment of Zakat and Income Tax in Financial Institution Statements

The Saudi Arabian Monetary Authority (SAMA) has issued a circular on the accounting treatment of zakat and income tax in the financial statements of banks and insurance and finance companies (collectively, "financial institutions"). Circular no. 381000074519, dated Apr 10, 2017 (14 Rajab14...

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Bibliographic Details
Published in:Journal of International Taxation 2017-07, Vol.28 (7), p.9
Main Authors: Lewis, Gareth, Sheikh, Asim, Abdullah, Ahmed, Epping, Franz Josef, Abdulkareem, Hosam, Iqbal, Imran, Jain, Nitesh, Maqbool, Parvez, Nini, Sohail, Gidirim, Vladimir A, Eldaw, Yousef, Zubair, Syed Farhan, Sainudheen, Ali, Ghobara, Hatem, Khan, Javed Aziz, deSequeira, Jude, McAree, Craig, El Izz, Ayman Abu, Ahmed, Imran, Alladin, Irfan, Desin, Mohammed
Format: Article
Language:English
Subjects:
Accounting
Accounting policies
Corporate income tax
Finance companies
Financial institutions
Financial statements
Foreign subsidiaries
Income taxes
International Financial Reporting Standards
International taxation
Profits
Retained earnings
Tax assessments
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Summary:The Saudi Arabian Monetary Authority (SAMA) has issued a circular on the accounting treatment of zakat and income tax in the financial statements of banks and insurance and finance companies (collectively, "financial institutions"). Circular no. 381000074519, dated Apr 10, 2017 (14 Rajab1438H) is effective as of Jan 1, 2017. The circular supplements SAMA's earlier guidance in circular no. 381000029499 dated Dec 14, 2016 (15 Rabi Al Awal 1438H). SAMA recognizes that since the accounting for zakat is not covered by the International Financial Reporting Standards, there is a need to provide guidance for the uniform accounting treatment of zakat and related matters in the presentation of financial statements. Zakat and income tax for the current period should be charged directly to the retained earnings of financial institutions (including foreign subsidiaries and branches) irrespective of their ownership structure.
ISSN:1049-6378