Accounting for Zakat and Income Tax

BANKING CONTROL From To Attention Subject Saudi }lra6ian �onetary jlutliority Saudi Arabian Monetary Authority (SAMA) All Banks, Insurance and Finance Companies 3_8j QQQQ74_5__t9.: �)I 1438l.01£1_4: � ...}-..:ill \ April 2017 Managing Directors, Chief Executive Officers and General Managers Accounting of Zakat and Income Tax This has reference to SAMA circular no. 381000029499 dated 15/03/1438, which explains amendments to SAMA Accounting Standards for Commercial Banks issued in December 1994, regarding treatment of Zakat and Income Tax. In order to clarify the accounting treatment and financial statement presentation of Zakat and Income Tax, SAMA has decided to take the following actions: • SAMA Accounting Standards for Commercial Banks will no longer be applicable from 1 January 2017. • All Banks, Insurance Companies and Finance Companies should prepare their financial statements using IFRS except for IAS 12 and IFRIC 21 so far as they relate to the accounting of Zakat (IFRS as adopted by SAMA). Accounting for Zakat is a matter, which is not addressed, by IFRS, and therefore SAMA recognizes a need to provide guidance for a uniform application of accounting and financial statements presentation of Zakat and related matters. • For the purpose of accounting of zakat and income tax, a standalone guidance document is being issued as per Annexure I which should be applicable from 1 January 2017. This treatment should be applied consistently across all the three sectors i.e. Banking, Insurance Companies and Finance Companies. • � :,_.-f' Deputy Governor for Supervision P.O. Box 2992 - Riyadh-11169, Saudi Arabia -Tel: 011-4633000-Telex 404390 SJ - Fax: 011-4632090