Actual Zakat rate varies significantly among insurance firms: Experts

MMJS Abdullah Al Sudais for Zakat and Tax Consulting Co. highlighted a significant variation in the actual Zakat rates among insurance companies, which ranged between 3% and 45% in 2023. It noted that proper planning ensures the payment of the exact required Zakat in accordance with Islamic law.

Speaking to Argaam on the sidelines of a seminar held in Riyadh on Zakat and tax challenges facing the insurance sector, MMJS said Zakat and income tax paid by insurers in 2023 exceeded SAR 531 million, averaging 14% of net income before Zakat and tax.

The company highlighted that this event coincides with changes in Zakat and tax regulations, posing a challenge for the sector in implementing such changes without incurring additional obligations.

Further, MMJS highlighted VAT-related challenges, particularly the lack of necessary approvals in the sector to issue invoices on behalf of suppliers in accordance with regulations. Another challenge is income tax deductions, due to the lack of clear contractual relationships between insurance firms and service providers like workshops and hospitals.

During the seminar, the company also explained the mechanism for applying the new Zakat regulations, set to take effect from the current fiscal year. It added that consultants recommended that insurers should study the new regulations to understand their impact.

Sulaiman Binmayouf, CEO of United Co. for Actuarial Services (CAIS)

Sulaiman Binmayouf, CEO of United Co. for Actuarial Services (CAIS), said the results for the first and second quarters were positive, particularly for market-leading companies, while the results were mixed for others depending on the scale of their business. He noted that most companies logged earnings, except for some small-cap firms.

Binmayouf said the third quarter typically coincides with the renewal of most policies, which helps record positive results, depending on the volume of claims. This means that earnings depend on the volume of paid claims.

Given the results of the first two quarters of 2024, insurance premiums and earnings are likely to continue rising, the CEO said.