Saudi Arabia: Insurers exempted from paying zakat over statutory deposits

Source: Middle East Insurance Review | Apr 2016

The Zakat Appeal Committee (ZAC) has paved the way for cooperative insurers in Saudi Arabia to be exempted from paying zakat charges over the statutory deposit, which amounts to 10% of capital each company reserves.

Some companies had raised objections against imposing the zakat. “The ZAC issued a recent ruling in favour of one company, exempting it from paying zakat on this deposit,” said Mr Basem Kamel Odeh, Chairman of the Insurance Executive Committee (IEC), and the CEO of Arabian Shield for Cooperative Insurance Co.

“This is a breakthrough which saves companies a lot of money, as some companies’ statutory deposits can reach up to SAR100 million (US$26.7 million) and therefore, annual savings as a result of this development could reach SAR2.5 million,” he said.

Insurers, like other commercial entities in the Kingdom, are required to pay zakat, an obligatory tax required by Shariah, amounting to 2.5% of wealth and savings above a certain amount. The deposit is placed at the bank account of the Saudi Arabian Monetary Agency (SAMA), which receives its returns.

SAR1 = US$0.27

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