Sheikh Haitham explores the matter of Zakah on business commodities,
- Business commodities as the only category of wealth which is based on its purpose rather than its nature.
- Wealth which may not reach the nisaab by its nature but may reach the nisaab when treated as a business commodity.
- The proof that business commodities are zakatable.
- The asl (origin) in the property of others is its permissibility.
- The asl (origin) of wealth is that it is zakatable unless proven otherwise.
- Ultimate purpose of trading is to gain gold and silver based currency ie money.
- When the zakah becomes due on business commodities.
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Key: Draft, Edited (by students), Checked (by the Shaykh)
In the Name of Allah, Most Gracious, Most Merciful
Zakat part 13
Bismillah ar-Rahman ar-Raheem
Zakat on business commodities (‘urood at-tijaara)
Allah makes it lawful for Muslims to engage in in business and to make profit, provided that they do not indulge in trading in commodities that are prohibited in Islam and that they observe ethical values in their transactions. Moreover, Allah has prescribed zakat upon both the assets invested into business and commerce as well as on the income derived therefrom.
Business goods are termed by the Fuqaha as ‘urud at-tijara, which means anything obtained for the purpose of trade for profit, except liquid monetary assets; whilst others state that it refers to that which is bought in order to sell for profit. Regardless, the definition includes machinery, furniture, clothing, foodstuffs, ornaments, jewelry, livestock, agricultural produce, land, buildings, etc. Hence, a Muslim who owns business goods equal to the nisab of money or more at end of a zakat year must pay its due at the rate of two and a half percent of its total retail value.
If one reflects on the overall categorization of how the Shariah views wealth and zakat, then normally these items; like clothes, cars, food etc, are not zakatable per se, but it is due to them being used for trading purposes that qualifies them for zakat. They are thus categorized as ‘urud at-tijara. This category can also include items that are originally zakatable due to their nature, like gold, silver, certain cattle etc, however they will now be zakatable due to usage i.e. as trading commodities. It is thus the most comprehensive type of zakat category as it is not only concerned with the nature of the item but also its usage.
[The Iktilaaf on how to calculate zakat on zakatable items by nature that are also being used for trading purposes was discussed earlier]
The obligation of zakat on trade
The ijma’ of the Companions, Followers and Salaf
Abu ‘Ubayd reports from ‘Abdul-Qari, “I was appointed treasurer at the time of ‘Umar ibn al-Khattab. When he paid out salaries, he used to calculate the assets of the merchants, both present and absent assets, and then collect zakat on them all out of the assets that were present.”1 .
It was also reported that ‘Umar wrote a letter to Ubayd al-Qaari instructing him to give zakat from his money. He replied saying he owned no wealth and that he simply manufactured bows, arrows, and quivers to sell. Umar than instructed him to give zakat of those commodities. Abu Dhar narrates that the prophet ordered them to give zakat on Buz or Baz [بز ], a type of trade stock. The author of al-Mughni comments, “the likes of such stories are common, and none of the companions dispute this ruling which implies a sort of ijma’ on this matter.”
The collection of zakat on trade assets continued during the time of the Companions and the era of the Followers.
Finally, jurists of the Followers’ era and the generations after them agreed that zakat is obligatory on trade goods. This ijma’ is reported by Ibn al-Munthir and Abu ‘Ubayd. Ibn al-Munthir writes, “People of knowledge unanimously agreed that zakat is paid on items intended for trade once a full fiscal year passes. This is reported from ‘Umar, his son, Ibn Abbas, the seven renowned jurists, al-Hasan, Jabir ibn Zayd, ash-Shafi’i, Abu Hanifa and his disciples. It is also the the stand of Ahmad and the Maliki school.”
It has been reported that Ibn Hazm opined that ‘urood at-tijara is not zakatable and more recently it is believed that Sheikh al-Albani was also of this opinion. However such an opinion is not correct as these scholars were preceded by ijma’.
The great judge Ibn al-‘Arabi says that zakat is obligatory on trade goods for four reasons.
Allah says, خُذْ مِنْ أَمْوَالِهِمْ صَدَقَة, which means al sorts of wealth
‘Umar ibn ‘Abdul ‘Aziz ordered zakat to be taken from trade goods on the advice of many scholars in the era of the Followers and no one raised objection to his action
‘Umar ibn al-Khattab collected zakat on trade goods long before ‘Umar ibn ‘Abdul ‘Aziz, as correctly reported from Anas
The report from Abu Dawud from Samura ibn Jundub that “The prophet used to order us to pay zakat on what we had for sale”
-Analogy and Reasoning
The main purpose of business is to make money i.e. to have growth, were money is merely a replacement of gold and silver and so commercial commodities must be amenable to Zakat. Just as the case is with gold & silver, agricultural products, and livestock.
Moreover, the wealth of business commodities is the best type of wealth which is in the possession of a few rich people. Taking into account that the purpose of zakat is to take from the rich and give to the poor, would it be reasonable that merchants and businesses, who may own the bulk of the wealth of a nation, be exempt?
Is the original principle regarding wealth that it is generally zakatable or not?
The Ayaat and Ahadeeth relating to Zakat speak about wealth in general terms and not specific. Many of the Mufassireen say the word Amwaal, the plural of Maal, mentioned in the Ayah above is a general term relating to all types of wealth.
Conversely, when the prophet exempted certain items he spoke in a very specific manner; like in the Hadith, “A Muslim is not obliged to give Zakat upon his slave nor his horse”. Or the Hadith of Abu Saed al-Khudri no zakat in less 5 Wisq, 5 camels, 5 Ounces.
A closer examination of such narrations in Arabic is indicative that the prophet spoke to the people as if they were presuming that all wealth is Zakatable, and so he would at time exempt certain things to show them otherwise, lest they ended up paying Zakat on them.
Lastly, the chapter of Zakat covers all types of wealth like animals, livestock, land etc. therefore, it seems as though the Asl regarding wealth in that it is Zakatable. Hadith of Samurah ibn Jundub we were commanded to give wealth ..daeef but meaning is correct as it is inline with Ijmaa.
The ultimate goal of trade is to make money which is equivalent to gold and silver and so the rulings on calculating it will follow by analogy. Hence the Fuqaha of the past perceived business commodities as another manifestation of gold & silver.
Shafi’ee & Ahmed = You have to give Zakat in the value of the commodities i.e. From the Qeemah
Abu Hanifah & Malik = You give what is better for the Fuqarah.
Conditions of zakat on business goods
Trade is exchange with the intention of making profit. Trade goods are commodities obtained for the purpose of selling at a profit. Thus two elements are involved in trade: the action of buying and selling and the intention of making a profit. Buying for the intention of using the asset is not trade. These two elements must always co-exist in trade and so changing ones intention from making profit to simply using would in theory remove the liability of zakat on that item. You do not have to classed as a business man to pay the zakat; it maybe a one off purchase to sell for profit.
Besides these conditions there are of course the general conditions of zakat which are the same as those of zakat of money, i.e. The nisab, the passage of one full lunar year (which begins when the nisab is reached), the absence of debts and similar liabilities, and being in excess of essential needs.
It should be noted that if one decides to sell an item one owned for personal use it becomes a trading stock and hence Zakatable, according to the majority, but not according to the Hanbali Madhab. The Hanbali scholars specify that the items must have been bought initially to sell. The Hanafi scholars say one must not just have the intention to sell but also initiate the selling process; regardless of whether the item was bought initially to sell or not.
Regarding certain items that are usually sold off by their owners after personal use, they are not zakatable when being used but rather only zakatable when their sale is actioned and one year elapses.
- The Nisab of ‘urood at-tijara
The nisab is the equivalent of the value of 85 grams of gold. As for the time of the zakat year at the the nisab condition should be fulfilled, there are two opinions among jurists.
It is sufficient that the nisab exists at the beginning and end of the year
The nisab must be present for the entire year and a drop below it would void that Hawl
It seems as though the first opinion is stronger and also more convenient for the business man as he does not have to continually check the value of his stock throughout the year. The first is the opinion of Malik & ash-Shafi’i and it was the approach practiced at the time of the prophet and his Khulafah with respect to zakat on livestock. The collectors were sent out on a certain date to collect zakat on all livestock that was at the nisab and above, without asking the owners whether the nisab was fulfilled throughout the year.
- the Hawl of ‘urood at-tijara
items come and go and can’t be accounted for, so how do you calculate the Hawl? One should assign a time every year and estimate the selling value as if you were selling all your current stock at that moment.
If you bought some goods and sold them off within the Hawl then only the money earned will be added to ones savings and take on the Hawl of the savings. The items that you posses at the end of the year are then subject to zakat if they are above the nisab.
Ahmed & Shafi’ee say one must give the value of the trading commodity and not a share of the actual commodity. Imam Malik say one should give what is most beneficial for the Fuqaraa. This shows us that the scholars perceived trading commodity as gold and silver.
Summary of how to calculate zakat; according to al-Hasan al-Basri:
“When zakat is due, one must add the amount of money in hand, plus the amount owed by others as outstanding debts, except the amount of hopeless debts (you doubt you will be paid back), and pay zakat on the total."
1) What is the evidence that business commodities are Zakatable?
2) Which companion stated that ‘The Prophet (peace and salutations be upon him) ordered us to give Zakah on business commodities’.
3) What is the nisaab for business commodities?
4) What is the opinion of the Hanafi school of thought regarding when a commodity is defined as a zakatable business commodity?
5) Which price is considered when calculating zakah; the buying price of the commodity or the selling price?
2) Sumarah ibn Jundub.
3) The same as the nisaab for gold and silver.
4) Only zakatable when the person has the intention to sell and takes the steps to sell the commodity.
5) The selling price.
فصل في هديه صلى الله عليه في الزكاة من مختصر زاد المعاد
"His guidance was the most perfect regarding the timing of it, the
amount of it, (the Nisab) and upon whom it is incumbent and upon
what it may be spent. And he kept in mind the interests of both the
owners of the wealth and the poor and needy. And Allah has made it
a means of purification for both the wealth and its owner and he
restricted the blessing of it to the rich and the blessing of the wealth
of those who give Zakah does not cease; indeed, Allah preserves it and
( Chapter: Regarding His Guidance in Zakah, from the abridged version of Zad al-Maad )