A businessman who has a medium-sized company is inquiring about the manner he should pay Zakah (obligatory charity). Should he pay Zakah on the capital of commercial commodities or on the profits,
particularly the commercial and industrial companies? Please advise us. May Allah reward you with the best!
There are four rulings on the company's funds with regard to Zakah:
Commercial commodities: These are to be estimated at the time when Zakah (obligatory charity) becomes due i.e. Upon the completion of a Hawl (one lunar year calculated from the time a property reaches the minimum amount upon which Zakah is due). It makes no difference whether their estimated value is equal, more or less than their value at the time of purchase.
Factory equipment: This includes machines, vehicles and such things that are intended for use but not for sale. No Zakah is due on them.
Profits: Zakah is due on profit provided that a Hawl has passed and the share of every partner reaches the Nisab (the minimum amount on which Zakah is due).
Share capital: If this is intended for trade and achieving profits, Zakah becomes due on the yield that reaches the Nisab when they are received. If the shares are offered for sale and trade, Zakah becomes due on the shares by estimating their value upon the completion of a Hawl.May Allah grant us success. May Allah's peace and blessings be upon our Prophet Muhammad and his family and Companions!