How To Pay Zakah On Your Investments

Transcription

1. How to Pay ‘Zakah’ on Your investments?
2. Definition of the ‘Zakah’: It is a specified obligation enjoined upon Muslims by Allah, the Almighty, paid on a particular level of wealth to certain deserving categories of people. It aims at purifying the wealth from possible Shariah non-compliance and to obtain the blessing of the Almighty Allah. a The Obligation of ‘Zakah’: ‘Zakah’ is a mandatory Islamic almsgiving and one of the five pillars of Islam. Its obligation is evident in the Holy Quran, the sayings of Prophet Mohammed (PBUH), and the consensus of Muslim jurists. The Almighty Allah says in the Holy Quran: «And perform the prayer, and pay the zakah…» (Surah Albaqarah verse 110). The Prophet (PBUH) said «Islam has been built on Five…” and he mentioned ‘Zakah’ as one of those five pillars. Muslims, through all times, have agreed on its obligation in general. Who Shall pay ‘Zakah’: An adult, sane and free Muslim who is aware of the obligation of ‘Zakah’. Conditions for obligating ‘Zakah’ on wealth: It is required that: 1.The wealth is owned by the person with discretion to dispose it. 2.The wealth has reached the threshold or the minimum value (NISAB) that one must own, to be required to pay ‘Zakah’. 3.The person owns the wealth for a complete lunar year (354 days). It can be calculated based on the Gregorian year (365 days) with a different rate of ‘Zakah’. 4.The wealth is growing or is able to grow. 5.It exceeds the usual needs of the person. 6.No restrictions exist, such as debts that -appropriates the wealth. Rate of ‘Zakah’: If ‘Zakah’ is calculated on the basis of a lunar year (354 days), its rate is 2.5%. For the solar or Gregorian year (365 days), the rate is 2.577%. In case the solar or Gregorian year is a leap year (366days), the rate of ‘Zakah’ is 2.5775%. 1
3. Types of Wealth subject to ‘Zakah’: First : Cash assets: • Gold and Silver: The minimum threshold for gold is 85 grams. The minimum threshold for silver is 595 grams. • Money: ‘Zakah’ is due on all monetary wealth as well as on gold and silver whether they are kept in a person’s own safe or in his bank accounts as long as it reaches the threshold. The minimum threshold for money is the equivalent market value of the threshold for gold or silver. The rate of ‘Zakah’ is 2.5% if calculated on the basis of a lunar year and 2.577% for a solar/ Gregorian year. If the wealth accrues interest -although it is prohibited- the ‘Za’ah› is paid only on the principal amount and the interest – should be donated to charities. Second : Financial investment assets : a.Investment Accounts: ‘Zakah’ is due on the balance of the investment accounts (principal plus profit). The rate of ‘Zakah’ is 2.5% if calculated on the basis of a lunar year and 2.577% for a solar/Gregorian year. If the balance includes interest, the ‘Zakah’ is due on the principal only. The interest is prohibited and should be donated to charities. b.‘Zakah’ of Investment Funds: Investment funds vary. Some of the important are as follows: 1.Commodity and Share Murabahah Funds: ‘Zakah’ is due on the balance (principal plus profit) of the Murabahah based funds, as if they were the assets for trade, given they reach the threshold and complete the one year ownership cycle. The rate of ‘Zakah’ is 2.5% of its market value as of the day of paying ‘Zakah’ if calculated on the basis of a lunar year and 2.577% for a solar/Gregorian year. 2.Ijarah/Lease Funds: No ‘Zakah’ is required on the assets of Funds investing in leased property, equipment, and vehicles. ‘Zakah’ is required on their return only after it reaches the minimum threshold and completes the one year ownership cycle. The rate of ‘Zakah’ is 2.5% of the total return if calculated on the basis of a lunar year and 2.577% for a solar/Gregorian year. 3.Equity Funds: Investment in Equity Funds can have different objectives: 2
4. First : If the objective of both the investor and the fund is to keep the shares and benefit from their dividends, ‘Zakah’ is due only on the dividends (same as the Lease Funds). Second: If the objective of both the investor and the fund is to trade in shares (buy and sell them), the investor shall pay ‘Zakah’ on the shares and their dividends (same as Murabahah Funds). Third: If the objective of the fund is to trade in the shares (buy and sell them), the investor in this case is considered a trader in shares and as such shall pay ‘Zakah’ on the shares and their dividends (same as Murabahah Funds). Fourth: If the objective of the fund is to keep the shares and benefit from their dividends, but the investor invests in the fund for the purpose of trading, the investor in this case is considered to be a trader in shares and as such shall pay ‘Zakah’ on the market value of the shares and their dividends (same as Murabahah Funds). c.The ‘Zakah’ of Sukuk: The Sukuk certificates represent undivided shares in the ownership of the underlying assets. All types of Sukuk are subject to ‘Zakah’ as follows: 1.Sukuk Al Ijarah (Lease): The ‘Zakah’ is not due on the principal value of the certificates. However, it is due on the rental proceeds at the rate of 2.5% for a lunar year or 2.577% for a solar/Gregorian year once the rental proceeds reach the minimum threshold and complete the one year cycle in possession. 2.Sukuk Al Musharakah (Partnership): ‘Zakah’ depends on the type of the underlying assets in the partnership based Sukuk. If the partnership is in traded assets, ‘Zakah’ is due on the market value of the certificates as well as on the return on those certificates if reaches the threshold and complete one year ownership cycle. If the underlying assets are leased assets, ‘Zakah’ is due only on the return of the certificates. The rate of ‘Zakah’ is 2.5% of market value on the day of paying ‘Zakah’ for a lunar year or 2.577% for a solar/Gregorian year. 3.Sukuk Al Mudarabah: ‘Zakah’ is due on the market value and the return of the Sukuk Al Mudarabah if the underlying assets are traded (bought and sold) and their market value plus return reach the threshold and complete one year ownership cycle. It is only due on the return amount if the underlying assets are leased and the return amount reaches the threshold and completes one year ownership cycle. The rate of ‘Zakah’ is 2.5% of the market value for a lunar year or 2.577% for a solar/Gregorian year. 4.Concession and rights based Sukuk: If the Sukuk certificates represent rights, they are considered as Investment in the Usufruct. The ‘Zakah’ is due only on the annually distributed return of rights. The rate of ‘Zakah’ is 2.5% for a lunar year or 2.577% for a solar/Gregorian year. 3
5. d .‘Zakah’ of Shares, Bonds and Treasury Bills: The rate of ‘Zakah’ is 2.5% of the market value of the Shares, bonds, and treasury bills for a lunar year or 2.577% for a solar/ Gregorian year as follows: a.The management of the company shall pay ‘Zakah’ exactly as the common person would if the shareholders have authorized them or if the Article of Association provided for such action. b.If a shareholder sold his shares during the year, he shall add their value to his other funds and shall pay the ‘Zakah’ when the annual maturity comes. c.If the shares are acquired for the purpose of trade and benefiting from the price fluctuation, and the company does not pay ‘Zakah’ for those shares, they are treated as trade assets if its market value reaches the threshold and completes the one year ownership cycle. d.If the shareholder is holding the share for the purpose of only benefiting from its profit, the ‘Zakah’ is due only on the profit amount if reaches the threshold and complete the one year ownership cycle from the day it was possessed. e.Bonds and Treasury Bills (paying interest) are considered as debts with interest. ‘Zakah’ is due on their principal amount. The interest is prohibited and shall be paid to charities. Third: Precious Metals & Gems: The ‘Zakah’ shall be paid at the rate of 2.5% for a lunar year or 2.577% for a solar/Gregorian year on the market value of precious metals and gems as of the day of paying ‘Zakah’. Fourth: ‘Zakah’ of Debts: There are three cases: First: For debts of a payable debtor: ‘Zakah’ must be paid yearly by the lender. Second: Debts of purposely delinquent debtor or an insolvent one: the ‘Zakah’ shall only be paid when they are collected and for one year. Third: Debts of the person who is paying ‘Zakah’ shall be deducted from the Zakatable fund (Amounts calculated for ‘Zakah’) whether they are currently due or deferred. 4
6. To Whom We Should Give ‘Zakah’: ‘Zakah’ is payable to eight categories of people mentioned in the following Quranic verse: «Alms are only for the poor and the needy, and those employed to collect (the funds), and to attract the hearts of those who have been inclined (towards Islam), and to free the captives, and for those in debt, and for Allah’s, and for the wayfarer (a traveler who is cut off from everything); a duty imposed by Allah. And Allah is All-Knower, All-Wise. .» ( Sura Al Tawbah verse 60) Rules related to the payment of ‘Zakah’: 1. In principle, ‘Zakah’ shall be paid to its beneficiaries (mentioned above) immediately when it becomes due. However, ‘Zakah’ may be invested in projects that benefit or transfers the ownership of such projects to these beneficiaries given that such investment does not impair the rights of beneficiaries. 2. The obligation to pay the due amounts of ‘Zakah’ does not expire over time. 3. The amounts of ‘Zakah’ can be paid in territory other than the domicile of its payer, if there is an obvious benefit. 4. The ‘Zakah’ contributor shall not release a debtor from his debt against paying him ‘Zakah’. Non Zakatable Assets & wealth: 1. There is no ‘Zakah’ on public assets or funds or extracted minerals if they are owned by the state. 2. There is no ‘Zakah’ on public social insurance funds of public organizations. 3. There is no ‘Zakah’ on charitable trust funds. For private family trust funds the ‘Zakah’ shall be paid on the remaining amounts which the beneficiaries have received after the span of one year over their possession. 4. There is no ‘Zakah’ on the wealth or funds of trusts dedicated for research, charitable or social organizations. Let Peace and Blessings of Allah be on our beloved Prophet Mohammed & His Family and the Companions. 5