Zakat base
In one sentenceThe amount on which Zakat is calculated; in simplified terms, sources of funding such as capital, reserves and retained earnings, minus fixed assets and similar items.
Simply put
The idea: you add up the sources of funding available to the business, including the year's net profit, then subtract the deductions, which are funds invested in assets not subject to Zakat, such as fixed assets.
If the base comes out lower than the adjusted net profit, the rule is that Zakat cannot be less than adjusted net profit × the rate.
Worked example
A trading establishment with a Gregorian financial year; these are its figures at year end.
Capital + reserves + retained earnings400,000 + 40,000 + 80,000 = 520,000 SAR
+ Net profit for the year520,000 + 100,000 = 620,000 SAR
− Fixed assets (net)620,000 − 200,000 = 420,000 SAR
Zakat at the Gregorian rate420,000 × 2.57768%
Zakat due10,826.27 SAR
Formula: Base = sources (including net profit for the year) − deductions, and Zakat = base × rate
Don't confuse it with
Adjusted net profitAdjusted net profit is one part of the base and its minimum, while the base includes all sources after deductions.