(May Allah bestow on Ethica Institute more wisdom and knowledge)
By AMANODING D. ESMAIL, CPA, MPA
President, Philippine Association of Islamic Accountants
Zakat On Tradable Goods. – Is zakat due on anything purchased with the intention of reselling?
- Zakat is due on anything purchased with the intention of reselling the item (e.g. business inventory, real estate, car, clothing), regardless of how much time elapses or how the item is used before resale (e.g. lent, rented out, put up as collateral); if there was no firm intention to resell at the time of purchase, but rather the individual considered resale only one possibility among others, such as using the item for personal use, then zakat is not due on the item; once the item is sold, zakat is payable on the proceeds after one lunar year elapses on the money.
- If an individual does not make a firm intention to resell an item at the time of purchase, but later decides to resell the item, zakat is due once the item is sold and at least one lunar year elapses on the money. Tradable goods are zakatable at all stages of production, regardless of whether they are raw material, work in progress or finished product.
Zakat On Means Of Production. – Is zakat due on means of production such as machinery?
- Zakat is not due on an investment’s means of production (e.g. property, plant and equipment).
Zakat On Uninvested Cash. – Is zakat due on uninvested cash?
- Zakat is due on uninvested cash or cash that is returned to the investor for the period of time that it remained uninvested.
Zakat On Investment Income. – Is zakat due on investment income?
- Zakat is due on the returns that one receives from an investment.
Zakat On Items Given In Charity. – Is zakat due on items held for one lunar year and subsequently given in charity?
- Zakat is due on items held for at least one lunar year before being given away in charity, because after a year zakat becomes a debt obligation that remains unfulfilled even by charity.
Zakat On Disbursed Loans. – Is zakat due on disbursed loans?
- Zakat is due on loans that have been disbursed where there is a reasonable expectation of receiving repayment.
Zakat On Waived Loans. – Is zakat due on loans waived even though the debtor is able to pay?
- Zakat is due on loans that are waived when the debtor is able to pay; the poor are due a share of the loan and waiving it unnecessarily amounts to misappropriating another’s wealth.
Nisab Fluctuations During The Year. – Am I liable to pay zakat if my property drops below nisab during the year?
- Zakat is due even if one’s property value falls below the nisab minimum and rises back above it during the year.