1. It is a settled principle that Zakah is payable each year on the sound component of the accounts receivables ( book debts), added together with the aggregate value of the Zakaatable assets held on the applicable Zakah valuation date. ( receivables + cash + gold and silver+ stock -in - trade ........).
2. In respect of bad or irrecoverable debts, if they are for any reason recovered, Zakah is payable in the year of receipt thereof, by adding the monetary receipt ( of the amount of the recovery) to the existing aggregate value of all the Zakaatable assets held on the applicable Zakah valuation date. It is prudent to pay for preceding years, as from the date the debt arose. فهو بمنزلة المستفاد و يضم المقبوض الى النصاب و يزكيه بحوله ولا يشترط له حول بعد القبض
3. The question arises whether book debts arising from the sale or supply of services by a trading enterprise or a qualified professional in private practice, should be treated as Zakaatable, on the same basis as ( tangible) stock - in - trade, as set out above.
4. The answer is in the affirmative.
5. When the classical jurists wrote their opinions several centuries ago, the level of economic development in their age was extremely limited. Modern unparalleled economic advances have given rise to substantial sophisticated service enterprises for gain in multiple fields of economic activity, including the various professions and professional practices. Some enterprises uniquely supply a combination of goods and services.
6. There is therefore no logical reason to differentiate between accounts receivables or debts arising from the sale of trading stock, and that of services rendered or supplied in the ordinary course of trade.
7. Imams Muhammad and Abu Yusuf, celebrated founding jurists of the Hanafi school, were of the opinion that all classes of sound debts should be treated equally, from the perspective of financial value; in respect of their Zakah treatment, such debts are deemed to be constructively owned and are converted to property or cash, once possessed or received الديون كلها سواء( فى حكم المالية) و كلها قوية تجب الزكاة فيها قبل القبض و يصير مالا حقيقة بالقبض فكانت سواء فى حق حكم الزكاة: المحيط البرهاني
8. The greatest classical authority on Zakah, Imam Abu Ubaid al- Qasim Ibn Salaam, in his seminal treatise on Zakah and Revenue, Kitab - al- Amwaal, after evaluating the several opinions on the proper approach to the Zakaatablity of receivables or debts, had concluded as follows: “ I have chosen that opinion which is consistent with the highly- ranked narrations which I have mentioned, namely from Umar, Uthmaan, Jaabir, Ibn Umar, thereafter the Taabieen( the generation after the companions).”.Zakah must be paid on debts every year, together with the aggregate value of the Zakaatable assets, on the applicable Zakah valuation date, provided that the debts are sound and ( the debtors) are reliable and financially able to pay their debts; because ( in this event) such debts are deemed to be ( constructively) in the trader’s possession and in his home.” قال ابو عبيد : و اما الذي أختاره من هذا فالأخذ بالاحاديث العالية التي ذكرناها عن عمر، و عثمان و جابر و ابن عمر ثم قول التابعين بعد ذالك: الحسن و ابراهيم و جابر ابن زيد و مجاهد و ميمون بن مهران: انه يزكيه في كل عام مع ماله الحاضر اذا كان الدين على الاملياء المامونين. لان هذا حينئذ بمنزلة ما بيده و في بيته. الاموال : باب الصدقة في التجارات و الديون و ما يجب فيها و ما لا يجب
9. Finally, the distinguished international Islamic Fiqh Academy, comprising global shariah experts, noting the clear differences of opinion in the classical schools, on the question of debts, after study, discussion, and debate, had adopted a resolution during its second session held in Jeddah in December 1985. ( Resolution 1) . The resolution is to the effect that the creditor رب الدين is obliged to pay Zakah on the debt each year, provided that the debtor has the financial capacity or resources, and willingness to pay the debt. اذا كان المدين مليئا باذلا . On the other hand, if the debtor is in financial distress or deliberately stalls the payment of the debt, then, in such event, the creditor is only obliged to pay the Zakah, in the year of receipt, when the debt so recovered is added to the aggregate value of his Zakaatable assets held on the ( applicable)Zakah valuation date. اذا كان المدين معسرا او مماطلا ( see the Arabic discussion papers, debates, and resolutions, in volume 1, part 2 of the journal of the Academy).
◦ And Allah Knows Best
◦ M S Omar
◦ 18 April 2021