Zakat base deductions
In one sentenceFunds of the business invested in assets not subject to Zakat, such as net fixed assets and certain long-term investments, which are subtracted from the sources of funding.
Simply put
The principle is that Zakat is due on growing wealth held for trade, not on assets acquired for use such as buildings, equipment and vehicles, so their net value is deducted.
Inventory, receivables and cash are not deducted, because they are trading wealth on which Zakat is due.
Worked example
The same factory, with sources of 500,000 SAR, holds these assets.
Net fixed assets (equipment and building)180,000 SAR
Long-term investment allowed as a deduction20,000 SAR
Base = sources − deductions500,000 − 200,000
Zakat base300,000 SAR
Formula: Base = sources of funding − deductible assets
Don't confuse it with
Trade goodsTrade goods are subject to Zakat and are not deducted, while assets acquired for use are deducted.