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Banks have been at loggerheads with the authorities since at
least the start of the year over additional payments of zakat -
the name of the tax - for years going back as far as 2002.
Banks have been contesting the extra payments, but a compromise
is close, said the sources, with one adding that the tax will be
calculated at 10 percent of each bank's profit.
The previous calculation by the General Authority of Zakat and
Tax (GAZT) was based on 2.5 percent of a bank's equity, with
adjustments.
GAZT did not respond to an emailed request for comment.
The increase in payments across the banking sector could be as
high as 25 billion riyals ($6.7 billion) if banks are told to
pay zakat based on a rate of up to 2.5 percent of their book
value, estimated Shabbir Malik, regional financial analyst at
investment bank EFG Hermes.
If the formula changes to banks paying zakat based on 10 percent
of profit before tax, it could be around 14 billion riyals, he
estimated.
The dispute prompted Crown Prince Mohammed bin Salman to
intervene earlier this year and direct the government to find a
breakthrough.
The sources said bilateral discussions have been continuing
between the lenders and GAZT and should be finalised before the
end of the year. One of the sources said the deal was likely to
be less harmful for banks than some lenders initially feared.
Analysts previously warned if the liabilities were too onerous
they might tighten liquidity at the banks, many of which help
finance the budget deficit through purchases of local bonds.
They could also curb banks' ability to lend to the private
sector, an integral part of Prince Mohammed's reform plan to
move the economy away from reliance on oil and create jobs for
hundreds of thousands of unemployed Saudis.
(Editing by Adrian Croft)
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