Zakat on Shares & Investments

About usAs a result of the return on stock investment, zakat must be issued in accordance with the agreement of the scholars at the First International Congress on zakat in Kuwait (29 Rajab 1404.) However, scholars differ on the obligation to pay zakat.

The first opinion expressed by Sheikh Abdurrahman Isa in his book “al-Muamalah al-Hadithah wa Ahkmuha” says that what must be considered before the issuance of zakat is the status of the company, where:

If the company operates only in the service sector, for example a travel agency, advertising agency, transportation service company (land, sea, air), hotel company, then its shares are not obliged to be zoned. This is because the shares are located in tools, equipment, buildings, facilities and other infrastructure. However, the profits earned are put into the assets of the owners of these shares, then the zakat is issued along with other assets if they have reached the haul and nishab (certain period and amount).

If the company is a pure trading company that carries out commodity buying and selling transactions without processing, such as companies selling industrial products, domestic trading companies, export-import companies, and others, then the company’s shares must be issued zakat. in addition to zakat on the profits earned. The trick is to recalculate the total number of shares then deduct the price of tools, goods or other inventory. The amount of zakat is 2.5 percent and can be issued at the end of each year.

If the company is engaged in both industry and trade, it means that it processes a commodity and then resells its products, such as Oil and Gas (MIGAS) companies, furniture processing companies, marble and so on, then its shares must be zoned with the same mechanism as the company. second category

The second opinion is that of Abu Zahrah. According to him, shares must be zoned without considering the status of the company because shares are assets in circulation and can be bought and sold, and the owner gets profit from the sale. This is a trade commodity with a zakat amount of 2.5 percent of its market price. The method is at the end of each year, the person concerned calculates the share price at the market price, then combines it with the dividends (profits) earned. If the share price and the profit reach the nishab then the shares must be zoned.

Yusuf Qaradawi himself has a slightly different opinion from the two opinions above. He said that if the company’s shares are in the form of goods or equipment such as production machines, buildings, transportation equipment, etc., then the company’s shares are not subject to zakat. Zakat is only imposed on the net results or profits earned by the company, with a zakat rate of 10 percent. This law also applies to company assets owned by individuals / individuals. It is different if the company’s shares are a traded commodity (listed on the stock exchange), zakat can be imposed on the shares and the profits at the same time because it is analogous to urudh tijarah (trading commodity). The amount of zakat is 2.5 percent.

This also applies to similar assets (other securities) that are owned by individuals. This last opinion, as conveyed by Yusuf Qaradawi, seems easier in its application. Zakat on shares is only required on shares in the form of trading commodities with a zakat level of 2.5 percent. For stocks in the form of tools or goods, the zakat is on the profits earned and not on the value of the shares themselves. The zakat level is 10 percent, analogous to zakat on agricultural and plantation products.