Calculating Zakah on Fixed Assets

These are long-term assets known in accounting as "fixed assets" e.g. lands, buildings, furniture and cars. They are not meant for resale, and can be divided into:

- Fixed assets that are meant for use and operation (durable goods). - Fixed assets that bring in revenue.

The following is s definition and evaluation of fixed assets according to standard accounting practices, and the evaluation and legal judgment pertaining to each fixed assets item, showing its degree of accountability with regard to Zakah:

1. Material fixed assets meant for use and operation (durable goods) *Standard definition and evaluation: Assets, such as real estate, machines, cars, and furniture, are owned and meant for use only, not for resale to gain a direct profit. These are to be evaluated on the original cost with depreciation. *Evaluation and legal judgment: No Zakah is paid on material fixed assets for use and operation. Also, the value of its depreciation is not to to be subtracted as commitments from the assets that Zakah is paid on. 2. Material fixed assets that accrue revenue *Standard accounting definition and evaluation: Assets that are possessed to accrue revenue such as real estate, and rented cars. These are to be evaluated on the basis of the original cost after subtracting its depreciation. *Evaluation and legal judgment: No Zakah is paid on these assets. Their net revenue is to be added to other assets liable to Zakah at a rate of 2.5%. This is the ruling chosen by the Islamic Jurisprudence Academy in Jedda. 3. Intellectual fixed assets meant for use and operating *Standard accounting definition and evaluation: Intellectual useful rights that aid in the operation of different activities and are not meant for revenue. They are evaluated on the basis of their cost which represents the sum paid for their attainment in addition to other expenses deducted from their consumption. *Evaluation and legal judgment: No Zakah is paid on these assets because they are connected with the fixed assets for their use with the aim of providing aid to the operation process. 4. The intellectual fixed assets the accrue revenue * Standard accounting definition and evaluation: These are non-material rights meant for accruing revenue or income such as copyrights and patents that are utilized for a determined period against a financial return. * Evaluation and legal judgment: No Zakah is payable on these assets. Their net revenue is added to the amounts upon which Zakah is due and 2.5% rate is to be taken thereof.

Points on fixed assets:

1. Depreciation of fixed assets represents the reduction in value due to an object's operation. It is to be calculated annually according to different depreciation methods. The legal judgment states that depreciation is not to be considered as part of the commitment subtracted from assets liable to Zakah, for such assets are not included in the amounts upon which Zakah is due. 2. Interest on loans to finance fixed assets: Some accountants are of the view that this should be added to the cost of these assets. This is referred to as Interest Capitalization. Legal Judgment: This Interest is seen as pure usury. If already paid, they would be excluded from the assets liable to Zakah. But, if they are not paid, there is no need to subtract them from the assets liable to Zakah, for this interest is not considered as legally payable debt, even if in accordance with civil law. Funds designated to finance the maintenance and preserving of fixed assets obtained for use. The legal judgment: this is not to be subtracted from the assets upon which Zakah is liable for it has not already been spent.

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General Rules of Calculation Zakat

The Concept of Calculating Zakah This concept covers the processes of calculating Zakah, evaluating the amount paid for it, distributing it among its various prescribed channels and stating all these activities in accordance with the jurisprudence of Zakah. Tasks of calculating Zakah are determined as follows: 01. Determining, identifying and evaluating the properties liable to Zakah. 02. Identifying, determining, and evaluating the commitments that are to be deducted from the properties liable to Zakah. 03. Calculating the minimum amount liable to Zakah and the amount paid for it. 04. Explaining how to distribute Zakah among its various spending channels. 05. Showing the Zakah resources and its spending channels during a given period through the available statement and reports of Zakah. Executive Procedures of Calculating Zakah The executive procedures for calculating Zakah are represented in the following: 01. Determining the end of the year, for the time at which Zakah is to be calculated. It varies according to the type of property liable to Zakah except for the Zakah due on plants, fruits, metals and natural resources. Zakah becomes due at the time of harvest or on discovering mineral and sea resources. 02. Determining and evaluating the various types of properties owned by a given person who is asked to pay Zakah, and determining what is included in Zakah and thus called "the properties liable to Zakah", or "the Zakah funds". 03. Determining and evaluating the commitments to be paid and deducted from the properties liable to Zakah. 04. Deducting due commitments from properties to determine those liable to Zakah. 05. Determining the minimum amount liable to Zakah according to the type of property or activity. 06. Comparing the value of property stated in Article No. four to the minimum amount liable to Zakah stated in Article No. 5, to decide whether the property will be liable to Zakah or not. 07. Determining the due quota for Zakah, which may be: a. 2.5% as in Zakah due on gold and silver, trade, used objects, work earnings, profits and minerals, according to the opinion held by the majority of scholars. b. 5% as in Zakah due on crops and fruits that are irrigated by tools and equipment (with irrigation costs). c. 10% as in Zakah due on crops and fruits that are irrigated by springs and rain (without irrigation costs). d. 20% as in Zakah due on mineral resources. 08. Calculating Zakah by multiplying its percentage by the total amount liable to Zakah. 09. Dividing the amount of Zakah as follows: a. When an enterprise is owned by individuals, the owner of the enterprise is responsible for paying the whole amount of Zakah due. b. When a firm is owned by partners, the amount of Zakah is divided among the partners according to their shares of the capital. c. When firms are founded on different sources of funding, the amount of Zakah is to be divided among the number of shares that comprise the business in order to determine the Zakah due on each share. Then, the shares of every shareholder are calculated in order to know the amount due on each one of them. 10. Distribution of Zakah on its various channels in the light of Islamic Law. 11. Showing and revealing the amount of Zakah and its distribution using financial reports and accounts. The Rules of Calculating and Distributing Zakah There are rules that govern the processes of determining, measuring, showing and revealing Zakah. These rules are deduced from sources of Islamic Law or based upon common accounting. They include the following: 1. The completion of a full year: Islamic jurisprudence considers the lunar year a sufficient period for increase. Therefore, a person who is legally required to pay Zakah must calculate all his properties according to their market value after a full year elapses. In Al-Sharh Al-Saghir, there is an authentic reference to that effect: Your assets must be evaluated every year according to their market value. The one who undertakes this process of evaluation must be just. The above-mentioned opinion cannot be applied to Zakah due on plants, fruits, and mineral resources. The Shafi`ites, for example, said: The completion of a whole year is a condition for Zakah to be obligatory. However, completion of the year is not observed for the Zakah due upon grains, and mineral resources. The Malikis said: Completion of the year is not a condition to be observed for the Zakah due upon mineral resources and plants. 2. Independence of fiscal years: Based on the previous principle of the completion of the year, calculating Zakah also depends on the independence of the fiscal year. Ibn Rushd explained this by saying: If a given person spent some of his wealth before the completion of a whole year, even shortly before its close, or it was lost, no Zakah would be due on that particular amount. He must pay Zakah on the rest of the wealth if it reaches the minimum amount countable for Zakah and if the fiscal year elapses. But, if he spent some of his wealth upon which Zakah was due after completion of the year, even shortly, or it was lost by any means, he must pay Zakah on it. 3. Real or assumed increase: The basis of Zakah calculation relies on the increase of the property liable to Zakah whether actual or estimated regardless of whether or not the property decreased in value from the minimum amount liable to Zakah at any time in the year or that the increase was not added to the capital. This has been clearly defined and explained by Dr. Shauqi Isma`il Shihatah: Profit is an increase in wealth that takes place during the fiscal year. Thus, whether the wealth diminishes by being converted to cash or is kept in the form of inventory by not being sold, there is a profit in both cases, as selling is nothing but converting the inventory into cash, which clearly shows the real profit. 4. Financial ability: The calculation of Zakah is contingent on the financial ability of the one who is required to pay Zakah, such that he should possess the minimum amount upon which Zakah then becomes due. Among the many Qur'anic verses related to this topic is: And they ask you what they should spend; say: What is superfluous. (Surah Al-Baqarah, Verse: 219) Al-Hasan Al-Basri interprets this by saying that one should not spend lavishly and squander all his property and then resort to begging. Also, this has been explained by the Prophet (peace be upon him) in saying to a man: Start with your own self and spend it on yourself, and if anything is left, it should be spent on your family, and if anything is left (after meeting the needs of the family) it should be spent on relatives, and if anything is left (after meeting the needs of the relatives), it should be spent like this; like this. And he was saying: in front of you, on your right and on your left. (Narrated by Muslim after Abu Hurairah.) This great Islamic principle does not aim at overburdening Muslims. It also urges them to prosper. The criterion for this ability concerning Zakah calculations is one for all kinds of wealth as it is estimated up to 20 dinars or 200 Dirhams. 5. Zakah is due upon the net revenue or the total sum according to the kind of activity concerned: In addition to the principle of ability, Zakah is also based on the principle of deducting current debts and other costs from the revenue or wealth in general. This is in order to make it easier for those who are required to pay Zakah. Proof for this principle is easily found, such as that stated by Abu `Ubaid after others: If Zakah becomes due upon you, consider what you have in cash and other assets; then evaluate these assets in terms of money. Total what others owe you and your debts to others and deduct them from the whole amount; and then pay Zakah on what is left. The point is to distinguish debts from wealth before identifying the Zakah base or the amount of wealth upon which Zakah is due. Also, one of the earlier jurists stated that: First pay your debts, and if the rest reaches five wasqs (a kind of dry measure) then, pay its Zakah due. (Yahia bin Adam Al-Qurashi - The Book of Kharaj [Zakah] - page 59). In addition, the Messenger of Allah (peace be upon him) used to ask those who carry out the process of estimating and evaluating crops and fruits in order to determine the Zakah base to be kind and lenient with the people, as he used to say: If you were to estimate and evaluate (the fruits) you take and leave one-third, and if you did not leave one-third, then leave one-fourth. (Narrated by Ahmed) It is evident from the previous points that the basis of Zakah calculation takes into consideration debts and costs that are necessary for earning a living, and the personal and family affairs of those who are required to pay Zakah. 6. Totaling property: All properties liable to Zakah are to be totaled and accounted for after determining the owner's debts. This has been confirmed by what was said by Ibn Al-Qaiym: The value of the merchandise is to be considered according to the trade prices in the countries in which these goods are found. So, if a given person sent some sort of goods to another country and it was traded before the completion of the fiscal year, its value would be counted according to the prices of that particular country. Also, one should combine the different kinds of goods and inventory in the evaluation process and offer Zakah upon all of them. 7. Principles of evaluation according to the current rate of exchange (market value): Islamic calculation of Zakah is based on evaluating the inventory before the end of the fiscal year in order to determine the Zakah due according to the current rate of exchange principle. Jabir bin Zaid said about inventory intended for speculation in trading: Evaluate and estimate it [your inventory] according to its market value on the day when Zakah falls due, then pay its Zakah. This was unanimously agreed upon by the majority of jurists. Maimun bin Mihran said: If Zakah falls due, consider what you have in cash and inventory, then, evaluate this inventory in terms of cash. Consider what others owe you and your debts to others and deduct all from the whole amount and then pay Zakah on what remains.

Dividing Money in Islamic Jurisprudence and its Relation to Calculating Zakah

In Islamic Jurisprudence, assets are divided into:

01. Currency: which is exchanged in buying and selling. It consists of two kinds: * Free money: gold and silver. * Bound money: banknotes and coins. 02. Other assets : meant to be utilized in a certain manner. They are of two kinds: * Durable assets: which are possessed for use in different activities e.g. machines and plow animals. This is equivalent to the modern term 'fixed assets'. * Inventory: which is prepared for sale and exchange, whether manufactured or bought to be exchanged in trade. 03. Animals: camels, cows, sheep and the like. There are three kinds * Animals raised for milk and breeding. laboring animals possessed for work. * Animals raised for trade. 04. Crops and fruits: the products of the land, divided into:   * Those irrigated by machines. * Those irrigated by rain, springs or taking water from the earth by their roots.

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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.)

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Sadaqah (Charity)

Allah says "Give the kinsman his due, and the needy, and the wayfarer" [al-Isra' 26]. Allah also says: "[Show] kindness to parents, to near kin and orphans, to the needy, to relatives, to neighbors who are not related to you, to fellow travellers and wayfarers, and [to the slaves] whom your right hand possesses" [an-Nisa' 36].

Allah links feeding the needy with performing prayers. According to the following hadith, related by authentic sources, the Messenger of Allah, upon whom be peace, said: "He who does not have mercy upon people, Allah's mercy will be kept from him." Anyone upon whom Allah bestowed His grace and who sees his Muslim brother hungry, in need of clothes, and miserable, and still does not help him, he will, indeed, deprive himself of Allah's mercy.

Islam calls upon the individual to spend freely in ways that please the heart of the donor, and evoke generosity, goodness, reverence, and obedience to Allah:

Allah, the Exalted One, says: "The parable of those who spend their wealth in the way of Allah is that of a grain of corn: it grows seven ears, and each ear has a hundred grains. Allah gives manifold increase to whom He pleases; Allah cares for all and knows all things" [al-Baqarah 261].

"By no means shall you attain righteousness unless you give freely of that which you love, and whatever you give, Allah knows it well" [al'Imran 92].

"And spend from what We have made you heir. For those of you who believe and spend, for them is a great reward" [alHadid 7].

The Messenger of Allah, upon whom be peace, said: "The sadaqah of the Muslim increases during his lifetime. It also softens the agony of death, and through it, Allah takes away arrogance and vanity."

The Messenger of Allah, upon whom be peace, said: "Acts of kindness protect one from ruin wrought by evil. Sadaqah given secretly appeases the anger of the Lord, and a gift to strengthen the ties of relationship increases one's life span. All good deeds are sadaqah, and those who do acts of kindness in this world are also the same people in the other world. Those who do misdeeds in this world are the same people in the other world. The first of those who shall enter Paradise are the people who do acts of kindness." This is related by at-Tabarani in al'Awsat. Manzhiri does not mention it.

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Zakah on the companies capital

The Fatwas delivered by the First Zakah Conference (held in Kuwait Rajab 29, 1404 A.H. / April 3, 1984 A.D.)

Zakah on the companies capital

Zakah is due on joint stock companies in the following cases:

If a law is passed and it obliges the companies to give Zakah.   If the main system of the company includes an article which stipulates giving Zakah on its capital.   If the general assembly of the company issues a decree in this regard.   If the share-holders agree that the company should give Zakah on their behalf.

It is rather better for the company to give Zakah on its capital. If it does not pay, the committee recommends that the company should calculate the amount of Zakah due on its capital and issue an addendum to its balance sheet which states the amount of Zakah due on each share.

Zakah on shares

If a Company pays Zakah on its shares, a shareholder is not required to pay Zakah on his shares once again. If it does not, the shareholder must pay Zakah as follows.

How to calculate the amount of Zakah due on companies' shares?

If the company pays Zakah, it will calculate its amount as an ordinary person would do. Zakah will be calculated according to the nature and type of possessions. If the company does not pay Zakah, a shareholder must pay Zakah due on his shares by following any of these two methods:

If one buys his shares for trade purposes, Zakah is due at a rate of 2.5% of their market value as followed when calculating Zakah due on commercial goods.

If one buys shares in order to make use of their annual revenues, Zakah is calculated as follows:

If one can know from the company the amount of Zakah due on his shares, Zakah is to be given at a rate of 2.5%.   If he cannot know, there are two different opinions:

The majority of scholars hold that the shareholder should add the revenues of his shares to the rest of his possessions and give Zakah at a rate of 2.5% on all his money.   Some other scholars hold that he should give 10% of the total revenues after receipt as followed in calculating Zakah on crops and fruits.

Second: Zakah on exploited items

Exploited items refer to factories, buildings, cars and machines intended for rent and not for trade. The Fatwa Committee holds that no Zakah is due on these items, but it is due on their revenues. There are different opinions on how to give Zakah on such revenues. The majority of members hold that these revenues are to be added to the other items possessed by their owners such as money and goods. A rate of 2.5% will be paid as Zakah on them.

On the other hand, some members hold that Zakah is due on the net revenues which exceed the owner's basic needs after deducting costs and rate of consumption. Rate of Zakah will be 10% as followed in calculating Zakah on crops and fruits.

Zakah on wages and salaries

Such money is the revenues of a man's work like workers' wages, employees' salaries and doctors and engineers' remuneration etc. Most members of the conference hold that no Zakah is due on such wages upon receiving them. One should add such wages to his own money and pay Zakah on them all if they reach the allotted Nisab and after they remain in one's possession for a complete year. If he receives any wages during the year, Zakah is to be paid at the end of it. Such year starts from the very day on which one's money has reached the allotted Nisab. In such case, the rate of Zakah is 2.5% annually. Some of the conference members hold that Zakah is to be paid on such wages upon receipt if they reach the allotted Nisab after fulfilling one's basic needs and no debt is entailed on him. If one pays Zakah on his wages upon receipt, he is not obliged to pay it once again upon the completion of a year. It is also permissible to calculate Zakah due on one's wages and give it along with his other kinds of property.

Fourth: Zakah on usurious deposits, securities and ill-gotten money

As for usurious securities and deposits, Zakah is due on their original values with a rate of 2.5%. No Zakah is due on the usurious interests because they are ill-gotten money that a Muslim should avoid. Such money should be spent in charitable channels and for Muslims' public interests except for building mosques or printing Qur'anic texts. As for looted or stolen money, no Zakah is due on it, but it should be returned to its real owner.

Fifth: The lunar calendar

The lunar calendar should be taken into consideration when calculating Zakah money. The Fatwa Committee recommends that individuals, companies and financial institutions should adopt the lunar calendar as a basis for preparing the balance sheet, or at least that they should prepare a special Zakah balance sheet according to the lunar calendar. If there is difficulty in this matter and the balance sheet was prepared according to the solar calendar, the difference between the two calendars should be taken into account. As the solar calendar is little longer than the lunar one, rate of Zakah will be approximately 2.577%.

Sixth: Investment debt and Zakah

If a debtor uses debt in trade purposes, it is not to be calculated as part of money on which Zakah is due. If it is used in buying houses or machines for possession, the committee pays the Jurists' attention that the issue should be carefully studied. That is because there is a legal opinion that debt is a reason for not paying Zakah on its equivalent value. Thus, many people, companies and organizations will not give Zakah under this pretext although they achieve good profits.

The committee holds the opinion adopted by jurists who believe that if the debt is postponed, it is not an excuse for not paying Zakah. Yet, the whole affair needs further study.

The committee recommends that next conferences resume their study of the issues that may arise in this regard which have not been studied by this conference.

Finally, the committee calls for paying attention to the importance of Zakah and its rules in all economic and social applications.

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Zakah on the rent of buildings.

Decrees issued by the Islamic Jurisprudence Academy in Mecca (Islamic World League)

First Decree - Eleventh Session

Zakah on the rent of buildings.

In its eleventh session held in Mecca, the Islamic Jurisprudence Academy of the Islamic World League discussed Zakah on the rent of buildings and the majority of its members decided the following:

No Zakah is due either on the value of the building prepared for accommodation or on its rent.   Zakah is due on the value of the building bought for trade purposes and its value is to be evaluated one year after buying it.   Zakah is due on the rent of buildings prepared for rent only.   Zakah on rent should be given one year after the lessor receives the rent.   Zakah due either on the rent of building or on the building itself (if bought for trade purposes) is 2.5%.

Fourth Decree - Eighth Session

Levying and Distributing Zakah in Pakistan

In its eighth session held in Mecca, the Islamic Jurisprudence Academy discussed the question directed by the Pakistani Embassy in Jeddah regarding the distribution of Zakah. The question deals with the channels of Zakah and whether the meaning of the Qur'anic phrase "in the way of Allah" refers only to Mujahidin or all sorts of charitable deeds such as public facilities, building mosques and bridges, spreading religious teachings and preparing missionaries.

After studying the subject, it appeared that there are two interpretations of the phrase:

Most scholars hold that "in the way of Allah" refers to Mujahidin only.   Some other scholars regard this as reference to all charitable deeds such as building mosques, roads, bridges and schools, preparing ammunition and spreading religious teachings by helping missionaries as well as any other public interests which may be of benefit to Muslims.

After discussing the opinions held by both parties, the Academy decided the following:

The second opinion is held by a number of Muslim scholars and it refers to other Qur'anic verses such as: "Those who spend their substance in the cause of Allah, and follow not up their gifts with reminders of their generosity or with injury, for them their reward is with their Lord; on them shall be no fear, nor shall they grieve." It also refers to a Hadith narrated by Abu Dawud. A Companion allocated a she-camel for riding during battles (in the way of Allah). When his wife wanted to perform Hajj, the Messenger of Allah (peace be upon him) said to her: Use it in riding, for Hajj is also in the way of Allah.   As long as the purpose of jihad is spreading Islam, preparing missionaries and spreading religious teachings are also a means for spreading Islam and hence a sort of jihad. The Messenger of Allah (peace be upon him) said: Fight the polytheists with your money, souls and tongues.   As long as atheists, Jews and Christians wage war against Islam and they are supported by money, the Muslims must face them by using their very same weapons.   As long as jihad in Islamic countries has its ministry if compared with the missionary call which is not supported by money or ministries, the Academy decides - in absolute majority - that "in the way of Allah" includes missionary call and all its complementary deeds.

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