Zakat is an Islamic direct tax applicable in the Kingdom of Saudi Arabia (KSA), and Kuwait. In Saudi Arabia, it is levied on shareholders of resident companies who are Saudi or GCC nationals. The resident company is required to pay a percentage based on a prescribed formula. Similarly, in Kuwait, Kuwaiti public companies and GCC companies with an entity in Kuwait must pay a prescribed percentage of their annual profit as Zakat tax. As a significant socio-religious element, Zakat tax is an important part of the tax system in these countries with non-compliance attracting financial penalties.
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