Fatwas and Recommendations

1. Amount of Zakah due on commercial goods

There is no difference between Zakah due on money and commercial goods as far as Nisab and the amount of Zakah are concerned. This is the opinion held by the majority of scholars. It is not true that this leads to equality in dealing with both the investor and money collector because Zakah is due on both at the very same rate. Investment aims at increasing the capital and hence Zakah can be paid on the revenues while the capital remains untouched.

Whoever does not find an opportunity for investing his money should pay Zakah on the capital. Prophetic Hadiths urged the guardian to invest the orphan's money in trade so that it will not be consumed in giving out Zakah.

Zakah is not due on the investor's money which turns into fixed assets. In most cases, money represents the capital of projects invested for attaining profits.

2. Industrial projects

After perusing the Fatwas delivered by the First Zakah Conference (clause 6), it turned out that industrial projects could be compared to cultivated land from the perspective that both are fixed assets which achieve income as a result of work. Therefore, Zakah is due on the output products at a rate of 5%. It is also possible to consider the permanent working capital (circulating assets) just like commercial goods. Hence, Zakah is due on both the original value as well as the attained profits at a rate of 2.5%. No Zakah is due on the fixed assets.

This subject needs further discussion in the next symposium.

3. Transference of Zakah money to other areas

According to decree No. 5 issued by the Second Conference of Islamic Research Academy, Zakah is a basis for social solidarity in all Islamic countries. The Prophet (peace be upon him) and the Rightly-Guided Caliphs used to distribute Zakah to its recipients in the area where Zakah is originally levied. The surplus is to be taken to other areas except in cases of starvation, disasters and abject poverty. In such cases, Zakah will be distributed to the more needy people. This rule applies either to the individual or the society. It is permissible for a person to distribute Zakah to his needy relatives if they live in another area.

4. Relief from debts due on Zakah recipient

If an insolvent borrower fails to settle up his debts to his lender who later acquitted him from paying them back, such debts will not be regarded as Zakah even if the borrower is a Zakah recipient. This is the opinion held by most scholars.

This rule applies to the following cases as well:

If the lender pays Zakah to the borrower who returns it as settlement of his debts without a prior consent, Zakah is valid.   If the lender pays Zakah to the borrower provided that the latter will pay it back instead of his debts or if both agree on this matter, Zakah is not valid. This is the opinion held by the majority of scholars.   If the borrower asks his lender to give him Zakah so that he could settle up his debt, and the borrower did so, Zakah is valid. Yet, the borrower is not obliged to pay back the very same amount as settlement of his debt.   If the lender said to the borrower: "Settle up your debt and I will give you Zakah." and the borrower did, Zakah is valid and the lender is not obliged to pay back the very same amount (of the debt) to the borrower.

5. Money given as advance Zakah

It is permissible that one should consider money he gives in advance before time of Zakah is due as Zakah if the appropriate conditions are met such as the possession of the allotted Nisab, the person who receives such money should be a Zakah recipient and that Zakah should be due on the person who gives such money. This is the opinion held by all scholars except for the Maliki Jurists. If one of the above-mentioned conditions is not met, money given will be considered as voluntary charity. It is not permissible to get it back after the Zakah recipient receives it unless it is given by the government or a Zakah organization. In such case, it is permissible to get it back after proving that the given money is more than the Zakah due unless it is distributed to its recipients.

6. The obligatory nature of Zakah and the role of governments in Zakah collection and distribution

The Fatwa Committee calls the Islamic governments to work hard towards implementing Shari`ah rules in all fields of life including the foundation of a special organization for collecting Zakah and distributing it to its legal channels provided that such organizations should have a separate balance sheet. In non-Islamic countries, there should be societies which direct their efforts to Zakah collection and distribution.   The committee calls the Islamic governments to issue the required legislative decrees so that Zakah organizations will be established and supervised by religious scholars and efficient employees.   The committee calls the Islamic governments to add to the taxation laws new clauses which deduct the amount of Zakah regardless of the amount of taxes legally allotted.   The committee calls the Islamic governments which apply Zakah rules to impose a social solidarity tax on non-Muslim citizens equal to Zakah. Such tax should be one of the resources of achieving social solidarity which covers all citizens who live in the Islamic country.

7. The Zakah channel : "in the way of Allah"

The Zakah channel "in the way of Allah" refers to jihad in its broad sense including the efforts exerted for spreading Allah's word, implementing the rules of Shari`ah, calling for Islam and defending Islam against its enemies. Therefore, jihad is not restricted to military activity.

Under this broad sense of jihad, the following are included:

Financing the jihad military movements which defend Muslims and protect their land as in Palestine, Afghanistan and the Philippines.   Supporting the individual and collective efforts which aim at implementing the rules of Shari`ah and opposing the plans of the Muslims' enemies.   Financing Da`wa centers in non-Muslim countries with the aim of spreading Islam by following the appropriate contemporary methods. This applies to every mosque established in a non-Muslim country.   Financing the efforts directed to spread religious teachings among the Muslim minorities in non-Muslim countries.

8. Zakah and fulfilling the basic needs of the poor

The term "basic needs" refers to the necessities required for achieving sufficiency and social solidarity according to the prevalent customs.   Zakah should provide the poor Muslim with his basic needs such as food, accommodation and clothes as well as the rest of his and his family's requirements without extravagance or parsimony.   Distributors of Zakah, whether individuals or organizations, should make investigations on Zakah recipients in a way that does not hurt their feelings to make certain that they are deserving it. It is not required to charge Zakah recipients to swear that they deserve Zakah unless there is doubt that they may be lying.

9. Zakah on housing and postponed investment loans

According to clause 10 issued by the First Zakah Conference regarding Zakah due on investment debts, and according to the opinion adopted in this conference which states that: "If the debt is postponed, it does not affect the obligatory nature of Zakah", the subject still needs further study. In this symposium, the following opinion is adopted:

As for housing loans which finance a fixed asset upon which no Zakah is due and which are settled on long-term installments, their value is to be deducted from the required annual installment if the debtor does not have other money to settle such debts.

As for the loans which finance the circulating working capital, they are to be deducted from the possessions upon which Zakah is due. The subject still needs a further detailed study.

10. Zakah on companies

The symposium discussed two researches submitted about this subject and below are its decrees:

The symposium recommends that the International Zakah Legal Authority in Kuwait should found a committee for discussing Zakah on companies. The members of this committee should include professional accountants, academic specialists in the field of accounting, Jurists and researchers interested in Zakah affairs and Islamic economy. The task allotted to this committee is studying the practical affairs related to calculating the possessions upon which Zakah is due as well as the accounting principles, rules and customs approved in preparing the company's financial data. The committee should submit the appropriate researches to be discussed in the next symposiums.   According to clause 9 issued by the First Zakah Conference, the symposium asserts that the lunar calendar is the basis for calculating Zakah, and this point should be taken into consideration when calculating Zakah due on the companies which prepare their financial data according to the solar calendar.

11. Zakah on commercial goods

Zakah on commercial goods should be given in cash after evaluating such goods and calculating the amount of Zakah due on them, because cash money is more useful to the poor who need to fulfill their basic needs. Even though, it is permissible to give goods as Zakah in case of recession or shortage of liquid money. The poor may make use of these goods as well. This is the opinion held by the members of the symposium in the light of Juristic viewpoints and the current circumstances.

Goods are to be evaluated according to their market value on the very day when Zakah is due. The sold goods are evaluated according to their wholesale price whether sold in retail or wholesale.

The Fatwas delivered by the Second Symposium on Zakah Contemporary Issues (Held in Kuwait at Dhul-Qa`dah 11, 1409 A.H. / June 25, 1989 A.D.)

1. Using Zakah in paying blood money (the channel of the debtors)

If a man commits unintentional homicide and his family or the Muslims' Public Treasury fails to settle up blood money due on him, it is permissible to use Zakah money in achieving this purpose. It is also allowed to pay such Zakah money to the family of the murdered person directly. As for blood money in case of intentional homicide, it is not permissible to use Zakah money in settling it up.

2. Zakah on ill-gotten money

After the members of the symposium had discussed the various researches submitted in this regard, they held that a lot of data and much details were still needed. Therefore, the symposium did not deliver any Fatwa until the subject would be discussed in its most accurate details.

3. Zakah on investment and housing debts

According to the tenth recommendation issued by the First Zakah Conference and the ninth recommendation of the First Symposium on Zakah Contemporary Issues which call for deducting the loans which finance the circulating capital while not deducting the housing debts or debts which finance fixed assets except for annual installments, the symposium members are of the following opinion:

All debts which finance a commercial transaction are to be deducted from Zakah possessions if the debtor does not have fixed assets which exceed his basic needs.   Investment debts which finance industrial projects are to be deducted from Zakah possessions if the debtor does not have fixed assets which exceed his basic needs so that such assets may replace these debts. If such investment debts are postponed, the required annual installment will be deducted. If there are sufficient fixed assets, they should be considered as replacement of the debts. In such case, debts will not be deducted from Zakah possessions. If the fixed assets are not sufficient so as to replace the whole debt, the remaining part of it is to be deducted from Zakah possessions.   As for postponed housing loans which are settled on long-term installments, the debtor is to pay Zakah on the remaining money actually in hand (if it reaches the allotted Nisab) after deducting the annual installment.   The channel of "those in bondage"

As this channel is non-existent at present time, its share of Zakah is to be distributed to the rest of Zakah channels. The Fatwas delivered by the First Symposium of Zakah Contemporary Issues (Held in Cairo Rabi` Al-Awwal 14, 1409 A.H. / October 25, 1988 A.D.)

Posted in: Fatwas of Zakat