Business Zakat

Business zakat is the obligatory zakat derived from business property whether based on manufacturing, mining, fishery, shipping, supply, agriculture, services or others with the purpose of trading.

Whether in the form of a private business, business partnership with muslim or non-muslim, business with all types of companies, cooperatives or stock businesses and so on.

Allah .S.W.T says:

يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ أَنفِقُوا۟ مِن طَيِّبَٰتِ مَا كَسَبْتُمْ وَمِمَّآ أَخْرَجْنَا لَكُم مِّنَ ٱلْأَرْضِ ۖ وَلَا تَيَمَّمُوا۟ ٱلْخَبِيثَ مِنْهُ تُنفِقُونَ وَلَسْتُم بِـَٔاخِذِيهِ إِلَّآ أَن تُغْمِضُوا۟ فِيهِ ۚ وَٱعْلَمُوٓا۟ أَنَّ ٱللَّهَ غَنِىٌّ حَمِيدٌ ۝٢٦٧

“O you who have believed, spend from the good things which you have earned and from that which We have produced for you from the earth.”

(Surah Al-Baqarah : Verse 267)

God explained that all ‘good results’ must be zakat. Therefore, for those who make the salary as a profession, then it is also included in the obligatory ‘result of business’.

Sa’id b. Abu Burda reported on the authority of his grandfather that the Messenger of Allah (p.b.u.h) said:

Giving of Sadaqa is essential for every Muslim. It was said (to him): What do you say of him who does not find (the means) to do so? He said: Let him work with both his hands, thus doing benefit to himself and give Sadaqa. It was said to him: What about him who does not have (the means) to do so? He said: Then let him assist the needy, the aggrieved. It was said: What do you say of one who cannot even do this? He said: Then he should enjoin what is reputable or what is good. He said: What about him if he cannot do that? He (the Holy Prophet) said: He should then abstain from evil, for verify that is Sadaqa on his behalf.

(Sahih Muslim)

Business Zakat Calculation Method

It takes into account the equity of the entrepreneur of the business entity, sources of financial financing and made adjustments whether mixed or otherwise. In simpler terms, the Capital is mixed with Profit.

Equity Owner + Long Term Liability – Fixed Assets – Non-Current Assets +/- Adjustment = Business Property Subjected to Calculating Zakah

It takes into account the position of the Property During the business is deducted with the current liability of the business and made adjustments with some matters relating to zakat to be considered. This adjustment is made by mixing items that have been identified to be added or minus.

Current Assets-Current Liability +/- Adjustment = Business Real Estate Subject To Calculating Zakah

Adjustment

The adjustments involved in the above calculation are based on the following arguments:

Rejected From Current Assets.

When considering the following current assets is a matter of adjustment:

Items That Not Required To Pay Zakat

Illegal goods and produce should be removed such as usury, gambling and wine.

Not Perfect Belonging

Water deposits, telephone deposits, electrical and other similar charges should be deducted because they do not meet the requirements of the proper property. (Zakat is only subject to recipients of such deposits as Telekom, TNB).

The Debtors

The lent money will be charged zakat on the borrower based on that property of the asset is transferred to the borrower. The borrower is in charge and is free to manage the money for any purpose and to benefit from the loan.

No Items Charged For Zakat Twice

The amount of dividend paid by zakat invested company will be deducted.

Current Assets Must be Productive

Bad debts, expired stocks, significant & permanent devaluation should be rejected.

Funds of Virtues

Funds for charitable purposes such as charity, education that is in the current assets will be exempted from zakat. However, a charitable fund that is revolving like a Qardhul Hassan loan, the amount exempted from zakat is the principal amount utilized whilst for a charitable fund that is ‘scorched’ through donation, only the residual value of the fund that is excluded.

For Inventory / Stock Category

Finished goods are the only one that been taken into account; while raw material stocks and work in progress are not taken into account.

** Current Assets (Adjustment Case that need to be mixed)

All contributions, donations and charities made by the business entity at the end of the haul (final quarter) need to be reconstituted (if the donation does not affect the liquidity of the company) into the current assets as the current assets being channeled for welfare are still subject to zakat unless the source is from the charity fund.

Mixed to Current Liability

According to Imam Syafie’s opinion – There is no debt requirement in determining whether the property is worthy of nisab or not. According to Syafie’s opinion the financial debt (non-trade liability) does not impose zakat obligations:

To meet nisab, the current liability that is deductible is that it is operating, including:

  • Trade Creditors.
  • Operating expenses (Operation Payables) such as salary, electricity, telephone.
  • Taxes.

Therefore the adjustment involves items that are not allowed to deduct as follows:

  • Non-business operations are financial loans and reclassification of term loans.
  • Proposed dividend (Dividend Payable).
  • ‘Overdraf’.
  • Finance / capital lease.

Calculate Business Zakat

Calculate Business Zakat