Zakat on Business

Zakat on business is an obligatory zakat to be paid on the income generated from the business either from goods, services or others with the purpose of trading. Zakat on business is obligatory on those who have fulfilled the conditions.

Allah, the Most Glorified, the Most High, says,
“[Are] men whom neither commerce nor sale distracts from the remembrance of Allah and performance of prayer and giving of zakah. They fear a Day in which the hearts and eyes will [fearfully] turn about” An-Noor [24:37]

Anas, may Allah be pleased with him, narrated that Abu Bakr wrote to me what Allah’s Messenger (ﷺ) has made compulsory (regarding Zakat) and this was mentioned in it: If a property is equally owned by two partners, they should pay the combined Zakat and it will be considered that both of them have paid their Zakat equally. [al-Bukhari].

Conditions Governing Zakat on Business

Muslim

All business entities owned by Muslims are obligated to pay Zakat upon it. For businesses with mixed ownership (i.e. 80% equity ownership of Muslims), only the part owned by Muslims is obligated to be paid upon it.

Full Ownership

Owner has the right to manage his assets including selling, gifting it or letting out the said asset. Physical ownership (hiyazah) and absolute management ownership (tasarruf) must also exist simultaneously.

Nisab (Minimum Amount)

The nisab of business assets is the equivalent of 85 grams of gold (20 mithqal). When the value of the business assets are the same or exceeds nisab, then Zakat is imposed on the stated assets.

Haul (Minimum Time Period)

Value of the assets calculated from the start of business until the end is known as haul. The haul period is calculated from the date the business started. For example, haul for business is the financial year ending June or December.

Intentions (Niat) To Do Business

Owner must have intention to do business (i.e. obtain profit) during ownership of trading goods (urud tijarah).

Assets or Services That Are Halal (Permissible by Shariah)

Business assets must be from Halal sources and the business activities too must come from Halal activities or services. All business properties that are Haram either from physical aspect side (‘ain) or from activities that are Haram such as usury are excluded in the calculation of Zakat.

Zakat on Business