ASSALAMU - ALAIKUM Dear Mufti Saheb/Moulana/Brother,
Please can you assist me with the following queries on Zakaat.
On our local radio station, in Ramadaan, the answer to the question on on
what cost should Zakaat be calculated for stock in trade, and, the answer
was on the retail price.
As you are aware that the price that any article is sold varies from
customer to customer and you have clearance sales, etc. Therefore on which
retail price should the stock be valued for Zakaat purposes? You may say
the last price at which the article was sold. But the last customer
happened to be my brother, e.g, and I sold to him at cost price.
In the manufacturing and food outlet industry this becomes even more
complicated. You have the raw materials, work in progress and the finished
article. How does one calculate Zakaat in this case?
Let's take the case of a fast food outlet. One buys a pocket of potatoes
for say R50. To make the chips the potatoes must be cleaned, sliced, fried,
salt/masala/vinegar added, put into a container and handed to the customer.
In addition there are costs of labour, oil and rent, packaging, electricity
and water costs that need to be taken into account. From this pocket of
potatoes 50 packets of chips are made and sold at R10 per packet.
If one has 10 pockets of potatoes and other ingredients on the day the
Zakaat is calculated how does one calculate the Zakaat payable?.
There are 2 kinds of pension funds:-
(1) Defined benefit Fund (Pension fund)
In this case when the member retires his pension fund, set up his
employer, managed by a Board of Trustees, pays him a monthly pension in
place of the salary he earned when employed. The employer must ensure, in
terms of the Pension Funds Act, that the fund has sufficient funds at all
times to pay the pensioners.
So for Zakaat purposes this is not a problem as the recipient calculates
his Zakaat on his liquid assets he has on the date he annually calculates
his Zakaat payable.
(2) Defined Contribution Fund (Provident Fund)
In this case the employer contributes a fixed amount of the
employee's salary monthly in to the Provident Fund and employee contributes
a certain % of his salary. In this case also the employer sets up the
Provident fund and is managed by a Board of Trustees. Both these
contributions accumulate to the member's account and is invested by the
Board. At retirement date the employee has a lump sum benefit. He can cash
everything up and pay the taxes owed to the government OR he can buy an
annuity from a service provider/insurer with the capital he accumulated in
the Provident Fund. In this case no tax is payable on the capital amount
that is transferred to the service provider. This annuity will pay him a
monthly pension in 2 ways:-
(a) Life Time Annuity : He procures a life time annuity/pension. So
as long as he lives the service provider will pay him a monthly pension
based on the capital he invested/transferred. The service
provider/insurer is responsible for the investments. When he passes away
the pension/annuity is stopped.
(b) Living Annuity : In this case his capital is transferred to the
service provider/insurer and he can draw between 2.5% and 17.5%
annuity/pension per annum. The member has a choice of investments to
choose from. When his capital runs out, after making his pension
withdrawals, the service provider will stop paying the pension/annuity. If
he dies before his capital is exhausted the balance will be available
for his beneficiaries.
In both these annuity types once the capital is transferred/invested with
the service provider/insurer one cannot get the capital returned.
How is Zakaat calculated/payable in these cases?
7 Safar 1432 (11-01-2011)
Your e-mail date 11-01-2011 refers.
(1) Zakaat is calculated on the wholesale price of stock, that is,
the current price you will pay if you have to purchase it. Zakaat is
not paid on the retail price. The retail price is a fiction. It has
not been tangibly acquired.
(2) Regarding providend and pension funds, there are two kinds –
voluntary and compulsory. If the worker has entered into the fund of
his own accord, then he is entitled to only the sum he has actually
paid into the fund. All excess funds he receives will be haraam and
Waajibut Tasadduq, i.e. he has to give the extra money to charity
without a niyyat of thawaab. He is allowed to accept for himself only
the amount which he had contributed.
If the fund is a voluntary contract, then the contributor has to pay
Zakaat each year on the actual amount of his contributions held by
the pension fund. It will be in the category of savings in a bank.
If the scheme is a compulsory one, namely, the worker has no choice
since the employer arbitrarily deducts from his ‘salary’ and makes
the payment, while he (the employer) too adds to the contribution,
then in this case there is no contract between the worker and the
company in terms of the Shariah. When the funds pays out, the whole
amount will be a gift to the contributor or his beneficiaries or to
whomever the fund pays. Zakaat will be due only after taking
physical possession of the money in this case.
(3) As far as all kinds of insurance policies are concerned, they are
haraam. The contributor is permitted to accept for himself only the
actual sum of his contributions. All excess is haraam riba which
should be given to charity without niyyat of thawaab. In this case
too, the contributor should pay Zakaat annually on the sum total of
his contributions held by the insurance company.
All ‘profit’ acquired from insurance investments are haraam and have
to be given to charity.
Mujlisul Ulama of S.A.