17 November 2016

Some lawyers I have encountered in Saudi Arabia claim they are prohibited from providing legal - or Sharia-related advice - about matters related to income tax and zakat, which is a mandatory taxation which instructs Muslims to pay 2.5 percent of their wealth annually.

This assertion appears to be based on incorrect legal reasoning and an implausible interpretation of legal texts. These misconceptions need to be corrected without delay and the aim of this article is to inspire a constructive discussion and debate on this topic and on other subjects related to it.

The claim that lawyers are prohibited from providing legal- or Sharia-related advice regarding income tax and zakat - in Saudi Arabia may be based on the “Rules Governing Licensing To Provide Zakat And Income Tax,” which was established based on ministerial decision No. 146, dated 26/07/1419H by the Minister of Commerce and Industry (a position that is now called the Minister of Commerce and Investment). This rule states, in Article 1, that “any natural or legal person shall not provide Zakat and income tax services unless he is licensed to provide this service by the Ministry of Commerce, however, CPAs (Certified Public Accountants) licensed to practice accounting and auditing profession in the kingdom may provide services of Zakat and income tax, upon special permit.”

The same article also lists the scope of zakat and tax advice as follows: “Advise taxpayers on matters related to the services of Zakat and Income Tax… Representation of taxpayer before the Department of Zakat and Income Tax [this Department is now called the Zakat and Income Tax Authority] and Zakat committees, as an attorney for the taxpayer.”

There are several reasons that these legal texts do not prohibit lawyers in Saudi from providing legal- or Sharia-related advice - regarding income tax and zakat. Firstly, if the interpretation or intended meaning of these rules is to prohibit lawyers from providing legal advice about matters concerning income tax and zakat, then such rules contradict a law – specifically the Law Practice Code – which is superior in the legal hierarchy to a ministerial decision.

Therefore, rules that were established by a ministerial decision cannot supersede this law, nor can they prohibit what it has been deemed permissible by the law, especially if the law does not authorise the Ministry of Commerce and Investment to state the scope of law practice. The Law Practice Code has permitted lawyers to provide Sharia-related and legal advice without limitation.

Matters relating to the legal profession fall within the jurisdiction of the Ministry of Justice and the Saudi Commission for lawyers, in accordance with the Law Practice Code and in accordance with the Saudi Organization for Lawyers. Meanwhile, professional accountants fall under the jurisdiction of the Ministry of Commerce and Investment and the Saudi Organization for Certified Public Accountants. Thus, the authority that supervises lawyers is not the Ministry of Commerce and Investment, except in cases of professional companies. Therefore, jurisdiction over professional companies falls between the Ministry of Commerce and Investment and the Ministry of Justice. This is an area of ambiguity and confusion that needs to be clarified and determined by a robust piece of law.

Lastly, the interpretation of the statutory provisions related to zakat and income tax, when it comes to Sharia-related or legal advice, and to litigation or representation before zakat and tax committees forms the core of the work of a lawyer. There is nothing in these statutory provisions that prevents a lawyer from conducting such work. Moreover, if the “Rules Governing Licensing To Provide Zakat And Income Tax,” truly meant prohibition, excepting the licensees of certified accountants, then such an interpretation would prevent the muftis, Sharia scholars and Islamic jurists from providing answers about zakat.

Thus, the optimal interpretation of the Law Practice Code, and of the “Rules Governing Licensing To Provide Zakat and Income Tax”, is that the latter restricts technical consultancy accounting to those accountants that are licensed or certified by the Ministry of Commerce and Investment. Therefore, lawyers in Saudi are clearly permitted to provide legal - or Sharia-related advice - with respect to zakat and income tax, and they are permitted to litigate matters before zakat and tax committees.

Any opinions expressed here are the author’s own.