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Basic Guidelines On Identity of Zakaatable Assets

1. Zakah is a fard obligation , arising on the Zakah valuation date ( eg : 1 Ramadan) on only specific , prescribed categories of assets, namely , on the complete ownership of the total aggregate  current market value of gold, silver, cash,  loans, shares and outstanding debt receivables , ( less relevant current liabilities) . Once so calculated, the amount of Zakah is a mandatory debt , due  and payable, on the valuation date, which must be discharged as soon as possible, by no later than 12 months. It may be discharged by unconditional delivery or transfer to the ownership of an eligible poor and needy recipient in cash or kind.

2. Any other asset, only constitutes a Zakaatable asset, at the Zakah valuation date, if such asset constitutes trading stock : that is, it was acquired at the time of purchase for the primary intention of resale, at a profit, and is therefore deemed to constitute trading stock. For this purpose, the word “ asset” includes all classes of  legitimate property, movable and immovable, acquired for resale.
 والأصل ان ما عدا الحجرين و السواءم  إنما يزكى بنية الزكاة: الدرر المختار.

3. Zakah is payable on trading stock, including raw materials, at the market value, or, otherwise in the case of manufacturers, retailers and wholesalers, at an estimated bulk value, calculated on the following basis: if the whole stock were notionally sold  by a willing seller to a willing buyer in a single indivisible sale transaction on the Zakah valuation date.( this may be equivalent to the cost price based on the established commercial practice of arm’s length voluntary sale of a buisness as a going concern.)

4. Shares in a solvent listed and unlisted trading public company , including equity unit trusts, acquired solely to hold as an investment ( and not as  trading stock for resale) : Zakah is payable thereon on the aggregate market value of the underlying Zakaatable assets, ( cash, stock and receivables, less relevant liabilities , or,  if difficult to calculate, at the market value thereof, on the Zakah valuation date.( with an adjustment of the rate at 2, 577 percent to take into account the lunar Hijri year, where applicable)..
 و يزكي ما يقابل اصل أسهمه من الموجودات الزكوية و هذا ما لم تكن الشركة في حالة عجز كبير بحيث تستغرق ديونها موجوداتها. قرار: 121:مجمع الفقه الاسلامي الدولي.

5. No Zakah is payable on the market value of rental producing immovable property ( letting enterprise) , unless the same was acquired  solely for purposes of resale at a profit, and therefore constitutes trading stock on the Zakah valuation date. Zakah is however payable on the net rentals received and remaining unexpended, on the Zakah valuation date.
 ان الزكاة غير واجبة في أصول العقارات والأراضي المأجور ة و تجب في الغلة ...
قرار2: مجمع الفقه الاسلامي الدولي

6. Zakah is payable on the sound component of book debt/ receivables, arising from the sale of trading stock , each year, if the the debtor is financially able, ( and is not in financial difficulty)or otherwise deliberately protracting.
 تجب زكاة الدين على رب الدين عن كل سنة إذا كان المدين مليئا باذلا: مجمع الفقه الاسلامي الدولي: قرار 1.

7. In relation to debts arising from services rendered by professionals etc ( and not the sale of tangible trading stock ) , Zakah is payable  in the year of actual receipt of the debt, according to the  classical well known debt categorization of Imam Abu Hanifah (RA).  However, his two students ( Imams Abu Yusuf and Muhammad RA) are of the view that Zakah is payable each lunar year on all categories of debts , which are deemed to rank equally as strong debts , as if , such debts are deemed in the constructive possession of the creditor. It is therefore prudent to pay each year.
 و عندهما : الديون كلها سواء قوية تجب الزكاة فيها قبل القبض: بداءع

8. In the case of compulsory membership of Provident and Pension Fund , arising from a mandatory term of employment, resulting in monthly deductions from salary at source, Zakah is payable only in the year of actual receipt, and and the cash proceeds are added to other Zakaatable assets in that year ( of receipt): the ultimate proceeds are treated as part of services rendered or in lieu thereof, hence there is no need to purify, irrespective of source of accrual.

9. In respect of voluntary contributions to retirement annuity funds, including preservation funds, outside the employment context, Zakah is payable each year on the member’s Fund value ( analogous to money voluntarily invested in a fixed deposit or participation bank account for a fixed period).

10. Deposits held in Trust by conveyancers and estate agents, pending transfer of immovable property: Zakah is payable thereon by the Purchaser, ( owner), on the Zakah valuation date, if registration of transfer has not  on that date occurred.

11. In respect of property originally acquired for  the purposes of development for resale at a profit ( eg: resale on sectional title), either complete or in course of construction, the developer must pay Zakah on the market value thereof, on the Zakah valuation date.( treated as trading stock).
 المنشآت قيد التنفيذ : تزكى بقيمتها يوم الوجوب و بحالتها الراهنة.
AAOIFI Standard 35 : 5/2 /6/3
 

12. Reserves or retained earnings in a Company are treated as a Zakaatable asset, and the shareholder is liable to pay Zakah thereon on his pro rata share thereof. In the Shafi’i school, and other schools , the Company is treated as a separate entity for purposes of calculating Zakah, with the result that Zakah may be paid by the company, as a separate legal entity, on behalf of its shareholders, if they so resolve.
على أساس تاثير الخلطة في حكم الزكاة   
 و قال الشافعي ...يجعل مالهما كمال واحد و تجعل عليهما الزكاة : بداءع
و أخذا بمبدأ الخلطة عند من عممه من الفقهاء  في جميع الأموال .

13. If a person owns Nisaab , at inception of the year, and thereafter during the course of the year receives ( a Zakaatable asset) from the same category , such receipt must be added to the  
Nisaab, and Zakah must be payable on the total aggregate value on the Zakah valuation date. For example, a person has cash of R 200 000,00 and receives dividends  or inheritance of R 100 000,00 one day before his Zakah valuation date, Zakah will be payable on R 300 000,00.
و من كان له نصاب فاستفاد فى اثناء الحول من جنسه ضمه اليه و زكاه به.
الهداية.


 14. In the Hanafi school, a person is required to make a specific bequest, in the form of a وصية ,  to pay outstanding Zakah, in which event , the Zakah will be discharged  by the executors and/ or heirs from one- thirds of his or her estate, calculated at time of death. On the other hand, in the Shafei school, the Zakah is a debt against the whole estate, and accordingly is an automatic charge against the estate, analogous to other contractual debts.


And Allah Knows Best
M S Omar
Durban
Updated:24 April 2020.

 

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I personally know the honourable Shaykh Mahomed Shoaib Omar for over thirty years. I found him to be an ardent seeker of knowledge, quick of mind &  constantly devoted to the study of the books of fiqh &  has written himself a number of papers. He has been amongst the foremost participants in drafting the Muslim Personal Law for S.Africa, so that it may be enforced there; and the majority of local Ulama have endorsed this.

~ Mufti Taqi Uthmani

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