Andersen

2021/02/01

Why Zakat and Tax Consultants?

One of the biggest problems that Gulf markets face is insufficient awareness of Zakat and Tax impact on the cash flow of commercial establishments. It is essential to have Zakat and Tax planning to maintain the company’s liquidity and manage its Zakat and Tax risks.

Corporates’ higher management should appoint a Zakat and Tax consultant to reduce the risks that the company may face, which has in many cases forced them to liquidate, discover variances in their Zakat and Tax statement, and pay penalties that resulted from not seeking the advice of an expert.

Reoccurring Mistakes that Lead to Financial Penalties

One of the most reoccurring mistakes from financial managers is controlling companies’ expenses where they are limited to the budget in their financial plan. Considering the added value provided by the Zakat and Tax consultants, there is no comparison between the cost of the consultation and the financial penalties that the company may adhere to as a result of not complying or understanding Zakat and Tax regulations. Moreover, corporate managements believe that the accountant (finance department) must be familiar with all the accounting principles, including Zakat and Taxes, and this is a big misconception because the finance department lacks a full understanding of the regulations of Zakat and Tax applied by the General Authority of Zakat and Income in the Kingdom of Saudi Arabia.

Common Corporates Poor Practices

As stated earlier, one of the corporate poor practices is controlling its costs at the expense of aggravating problems, such as, hiring an accountant who specializes in auditing; adding on Zakat and Tax consultations without assuring that all those tasks are accomplished professionally without making mistakes. Errors may not be visible to the company immediately, but most of the Zakat and Tax disputes occur years after providing poor advice and application. This is because many auditors lack understanding of their regulations and how to use them in an optimal manner that serves the company’s best interest to avoid future penalties by the General Authority of Zakat and Income.

Corporate’s Management Role

Corporates’ higher management are advised the to seek support and appoint a Zakat and Tax consultant with long-standing consulting firms to check the integrity of all the company’s financial statements and to be able to form an opinion on the Zakat disclosure which can help avoid many problems that may occur with the General Authority for Zakat and Income. This way, the company avoids the Authority’s inquiries about the many items that must be disclosed and the details of its financial statements so that the references of the General Authority for Zakat and Income can accept them without any further altercation.

Some may think that legal accounting offices have sections for Zakat and Tax advice, and therefore they can perform this procedure without the need for a specialist. Yes, this may be correct, but the majority of legal accounting firms prefer those who work as a general accountant without any specialization so that they will not only work as internal and external auditors but also as advisors for Zakat and Tax which increases the possibility of errors. It is vital to mention that Zakat and Tax consultancy offices only attract consultants or lawyers specialized in accounting for Zakat and Tax cases so that they can provide professional guidance and advice to the company, calculate its Zakat and Tax, and legally address the General Authority for Zakat and Income to eliminate any risk on the company.