Zakat on Shares Owned in a Business

CategoriesZakah [232]

Fatwa ID: 06128

 

Answered by: Alimah Zakiratul Hoque

 

Question:

 

Zaid has been working for a small business for a couple of years and the business owners decide to make him a partner in the business and make him the fifth co-owner. The business has no zakatable assets besides cash (the business sells services, and does not sell any goods). The business has $50 million in cash (and let’s assume no liabilities).

 

* Zaid has to pay a nominal fee of $10 to become a co-business owner, and if he leaves or retires, he will receive the $10 back, nothing more and nothing less. This is pre-determined and considered to be a payment for “stock” to have the privilege to co-own the business.

 

* Zaid cannot sell his ownership, and otherwise does not receive any significant buy-out if he leaves the business.

 

* Zaid does not have free access to any of the business’s cash. He doesn’t necessarily own rights to that cash as an individual, despite being a co-business “owner”/“partner”.

 

* If an outside corporation theoretically buys the business and all the partners in the business agree to sell the company, then the cash-on-hand would be distributed equally amongst the partners.

 

Does Zaid owe zakat one-fifth of the business’s total cash? In other words, does he pay 2.5% of $10 million?

 

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

 

Zakat is owed on all trade goods that reach the Nisaab (Fatawa Hindiyyah, Vol 1, Pg 197). Zaid should pay Zakat on the value of the shares of stock on his own if it meets the Nisaab and he has owned it for a year. If he receives any dividends during the year, he should add them to his wealth and pay Zakat on it. Zaid does not need to pay Zakat on the business’ total cash as he does not own it.

 

الزكاة واجبة في عروض التجارة كائنة ما كانت إذا بلغت قيمتها نصابا من الورق و الذهب

 

 

 

Only Allah knows best.

Written by Alimah Zakiratul Hoque

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

 

 

 

 

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