Article 196 of the Saudi Companies Law
المادة 196 من نظام الشركات · الباب السابع: الشركة غير الربحية
The article tasks the Zakat, Tax and Customs Authority, in coordination with the Ministry, with setting the rules for non-profit companies not being subject to zakat and being exempt from taxes, and for deducting donations made to them from the tax base.
Official text (Arabic)
This article has not been amended since the law was issued.
استثناء من الأنظمة ذات العلاقة، تضع هيئة الزكاة والضريبة والجمارك، بالتنسيق مع الوزارة، الضوابط اللازمة لعدم خضوع الشركات غير الربحية لأحكام جباية الزكاة وإعفائها من الضرائب، وحسم التبرعات المقدمة إلى هذه الشركات عند تحديد الوعاء الضريبي للمكلف.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 196 explained in plain English
This article deals with the zakat and tax treatment of non-profit companies. It does not itself directly grant the exemption but refers to rules to be set by a specified authority.
The competent authority: the Zakat, Tax and Customs Authority, in coordination with the Ministry.
The rules the Authority sets:
- Rules for non-profit companies not being subject to the provisions on collecting zakat.
- Rules for their exemption from taxes.
- Rules for deducting donations made to these companies when determining the taxpayer's tax base, meaning that a donor may benefit from deducting his donation when calculating the tax he owes, in accordance with these rules.
The phrase "as an exception to the relevant laws": this means these rules are set even if other zakat and tax laws provide otherwise.
The article itself does not state the conditions of the exemption, its percentage, or the method of deduction; all of that is left to the rules the Authority sets. It should therefore not be assumed that every non-profit company is automatically exempt without referring to those rules.
The article is connected to Article 195, which permits public entities and public sector employees to form non-profit companies. To assess the zakat and tax position of your company or your donation, it is advisable to consult a lawyer specializing in companies and commercial cases.
Practical example
A commercial company in Dammam donated an amount to a non-profit company that works in patient care. The article provides that the Zakat, Tax and Customs Authority sets the rules for deducting such donations when determining the taxpayer's tax base, so the donating company needs to review those rules to know whether and how its donation is deducted.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 196 of the Saudi Companies Law
Is a non-profit company exempt from zakat and tax?
The Zakat, Tax and Customs Authority, in coordination with the Ministry, sets the rules for it not being subject to zakat and for its exemption from taxes, so the exemption applies according to those rules.
Can a donation to a non-profit company be deducted from tax?
The article provides that the Authority sets the rules for deducting donations made to non-profit companies when determining the taxpayer's tax base.
Who sets the rules for exempting non-profit companies?
The Zakat, Tax and Customs Authority, in coordination with the Ministry.
More articles on Non-Profit Company
- Article 2
تعرّف المادة الشركة بأنها كيان قانوني يقوم على مساهمة شخصين أو أكثر في مشروع ربحي لاقتسام الربح والخسارة، مع جواز تأسيسها بإرادة شخص واحد وتأسيس شركات غير ربحية.
الشركة كيان قانوني يؤسس وفقًا لأحكام النظام بناء على عقد تأسيس أو نظام أساس يلتزم بمقتضاه شخصان أو أكثر بأن يساهم كل منهم في مشروع يستهدف الربح بتقديم حصة من ما
- Article 185
The article defines public and private non-profit companies, sets the forms they may take, prohibits offering their shares for public subscription, and applies the rules of their form where this chapter is silent.
1- الشركة غير الربحية العامة: هي شركة تتخذ شكل شركة المساهمة وليس لها اتخاذ أي شكل آخر، وتنفق الأرباح المتحققة من ممارسة نشاطها في أي من المصارف والمجالات غير ا
- Article 186
The article requires the public non-profit company's articles of association to state its public non-profit fields, and allows a non-profit company to collect returns and carry on a lawful activity whose profits are spent on those fields.
1- يشترط للموافقة على تأسيس الشركة غير الربحية العامة النص في نظامها الأساس على المصارف والمجالات غير الربحية العامة، ويجوز للشركة غير الربحية الخاصة النص في عق
- Article 187
The article requires the Ministry's approval for an amendment to a public non-profit company's articles of association to take effect if it covers rules on disposing of assets, the board's powers, or the company's outlets and fields.
إذا اشتمل قرار تعديل النظام الأساس للشركة غير الربحية العامة على تعديل أحكام التصرف في الأصول أو تعديل صلاحيات مجلس الإدارة أو مصارف ومجالات الشركة، فلا يكون هذ
- Article 188
The article makes every partner or shareholder in a non-profit company a member, lets the formation documents regulate membership classes, powers, fees and certificates, and lets the Ministry regulate aspects of membership.
1- يكون كل شريك أو مساهم في الشركة غير الربحية عضوًا. 2- يجوز أن ينص في عقد تأسيس الشركة غير الربحية أو نظامها الأساس على الآتي: أ- تحديد فئات وشروط وأحكام العض
- Article 189
The article provides that each membership class in a non-profit company gives rise to equal rights and obligations, and that a member holds the rights of his membership, including taking part in assembly deliberations and inspecting records.
ترتب كل فئة من فئات العضوية حقوقًا والتزامات متساوية، وتثبت للعضو جميع الحقوق المتصلة بعضويته بما في ذلك الحق في الاشتراك في مداولات جمعيات الأعضاء، وحق الاطلاع
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.