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Zakt on Companies, Shares, Bonds and
Deposits
Judgment Issued For Virtual Sharah Court
Imran A. Nyazee Version 1.0
nyazeeIcIoud.com January 3, 20l3
CIIe as: VSCJ-2 (20l2)
THE PETITION
ri1i1ioN was Ied In IhIs courI asserIIng IhaI AIIh AImIghIy has xed a
share In Ihe weaIIh oI Ihe rIch Ior Ihe oor by way oI zakt, buI Ihe rIch
who own comanIes and cororaIIons are noI ayIng zakt. IurIher, Ihe
Iearned schoIars (mufts) have creaIed some conIusIon abouI whaI Is due
Ihrough IheIr dIscussIons oI zakt on shares and wheIher a comany, beIng
a IegaI erson, Is IIabIe Io zakt aI aII. II Is obvIous IhaI mosI oI Ihe weaIIh Ioday Is heId
by Ihese comanIes, and II Is noI roer, accordIng Io Ihe sharah, Io wIIhhoId or deny
IhIs rIghI oI Ihe oor. A decIaraIoy judgmenI Is soughI IhaI seIIs ouI cIearIy whaI Is
Ihe rIghI oI Ihe oor and whaI Ihe comanIes, cororaIIons, arInershIs and busIness
owe by way oI Ihe sacred duIy oI zakt.
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l Int1s oi 1ui Cnsi nNu ANnivsis oi 1ui Ruiis . . . . . . . . . . . . . . . . 1
2 Tui RuiiNo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RiiiniNtis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
l Int1s oi 1ui Cnsi nNu ANnivsis oi 1ui Ruiis
1. ThIs Is a cIass acIIon suII where Ihe rIghI oI Ihe oor eoIe, as a cIass, Is Io be
deIermIned In zakt ayabIe by comanIes. The cororaIIons (governmenI or rIvaIe),
comanIes (ubIIc or rIvaIe), arIershIs and busIness venIures are aII IreaIed as
deIendanIs.
2. The vIews oI aII Ihe Iearned mufts cannoI be recorded here. II Is, however, a-
rorIaIe Io reroduce one resoIuIIon Issued by Ihe IsIamIc IIqh Academy, OIC, on Ihe
Issue oI comany shares. ThIs resoIuIIon shouId exIaIn howIhe schoIars aroach IhIs
Issue. The resoIuIIon Is as IoIIows:
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2 Vin1uni Sunninu Coun1 l
Resolution No. 28 (3/4)
CONCERNING PAYMENT OF ZAKAT ON COMPANY SHARES
The Council of the Islamic Fiqh Academy, holding its Fourth session, in Jeddah, (Kingdom of Saudi
Arabia), from 18 to 23 Jumada Thani 1408 H (February, 6 to 11, 1988),
Having considered the research papers submitted to the Academy concerning Payment of Zakat on
company shares;
RESOLVES,
First: Shareholders may pay Zakat on their shares. The companys management may pay Zakat on
their behalf :
If its statutes so stipulate,
by virtue of a General Assembly ruling
If the law of the land requires that companies must pay Zakat on behalf of its shareholders
Or if a shareholder himself empowers the Management of the Company to pay Zakat on his
behalf.
Second: The management of the company shall pay Zakat on shares in the same manner as a person
pays Zakat on his wealth. In other words, it shall pay Zakat on the assumption that the capital of all
shareholders is the property of a single person, and calculate Zakat accordingly, taking into account
the type and value of assets subject to Zakat, its percentage and any other consideration relevant to
the Zakat of a physical person; according to the principle of mixed assets generally accepted by some
Fiqh scholars (Fuqahas) concerning all assets.
In calculating Zakat, the company shall take due account of shares not liable to Zakat, such as
shares owned by the Public Treasury, charitable institutions, philanthropic societies and non Muslim
shareholders, and make the necessary deductions.
Third: If, for any reason, the company did not pay Zakat on its assets, each shareholder liable to
Zakat must do so on the shares he owns. If the shareholder can calculate the amount the company
would have paid on his behalf had it done so, he should then pay the same, since that is the basis for
calculating Zakat on shares.
If the shareholder has no means of knowing these elements of information for calculating the amount
due, then:
If he had invested in the company to benet from the annual dividends of his shares, and not for
trading purposes, then the owner of such shares will not pay Zakat on the market value of shares,
but only on the basis of the dividends, at the rate of 1/4 of 1/10 (2.5%) after the elapse of one year
from the date of the actual reception of the dividends, provided that all other conditions are met and
no impediment exists. This ruling is in conformity with resolution 2 (2/2) adopted by the Council of
the Academy at its 2nd session, with respect to Zakat on the rented real estates and non agricultural
leased lands.
If, on the other hand, the shareholder has invested in shares for trading purposes, then his shares are
subject to Zakat as commercial goods. After the elapse of one year period, and if they are still in his
possession, he shall pay Zakat on their market value; if there is no stock market, he will pay Zakat
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2 Vin1uni Sunninu Coun1 3
on their value as appraised by qualied experts. He will pay 1/4 of 1/10 (2.5%) of their market value
plus their dividends, if they yield any dividend.
Fourth: If during the year, the shareholder sells his shares he will add their price to his wealth and
should pay Zakat on the total of his assets at the end of the year. As far as the buyer is concerned,
he shall pay Zakat as indicated above.
Verily, Allah is All-Knowing.
3. The above resoIuIIon oI Ihe IsIamIc IIqh Academy Is hereby rejecIed in toto. II
Is based on a deIecIIve undersIandIng noI onIy oI Ihe ruIes oI Ihe sharah, buI aIso oI
Ihe Iaw. A comany Is a IegaI erson In Ihe eyes oI Ihe Iaw and II owns aII Ihe asseIs
In IIs own name. The sharehoIder has noIhIng Io do wIIh Ihe asseIs oI Ihe comany.
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The resoIuIIon rsI IreaIs Ihe comany as a sIngIe erson Ior workIng ouI Ihe deIaIIs
and Ihen Iaces aII Ihe IIabIIIIy Ior zakt on Ihe sharehoIder. ThIs Is absurd, because
Ihe sharehoIder Is noI a joInI hoIder oI Ihe asseIs, he has no conIroI over Ihese asseIs,
Ihe asseIs are In Ihe name oI Ihe comany, and Ihe mosI oI aII Ihe sharehoIder does noI
manage Ihese asseIs. Above aII, In mosI cases Ihe sharehoIder Is noI even aware oI whaI
Ihe asseIs are or whaI Is IheIr vaIue. Why Ihen shouId he ay zakt7 AII IhaI he hoIds
In hIs hands Is a scrI IhaI aIIaches cerIaIn rIghIs. RIghIs are noI ml In any case In
Ihe sharah. Many oIher objecIIons can be raIsed Io show IhaI Ihe resoIuIIon Is based
on an InadequaIe arecIaIIon oI Ihe sharah ruIes as weII as ruIes oI Ihe exIsIIng Iaw.
The arI oI Ihe ruIIng IhaI deaIs wIIh brokers and InversIors deaIIng In shares aears
Io be correcI on Ihe Iace oI II, and II wIII noI be dIscussed In IhIs judgmenI.
4. The cororaIIon Is a devIce Ior raIsIng huge sums oI money. The IegaI erson has no
exIsIence In Ihe eyes oI Ihe sharah, because II cannoI have a comacI oI dhimmah wIIh
Ihe AImIghIy, and Is noI IIabIe Ior reIIgIous duIIes. In IhIs case, we have no oIIon, buI Io
say IhaI Ior uroses oI zakt, Ihe cororaIe veII sIands IIIIed. Once Ihe cororaIe veII Is
Ierced we are IeII wIIh a grou oI eoIe (sharehoIders) who are owners oI asseIs IhaI
wIII be consIdered IheIr joInI asseIs. These asseIs are mush, IhaI Is, each erson Is an
owner In every arIIcIe oI Ihe asseIs, and IheIr searaIe shares cannoI be dIsIInguIshed.
5. The recedenIs abouI ImosIng zakt on joInI asseIs are many and come down
Io us Irom Ihe ComanIons (Ood be Ieased wIIh Ihem).
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In IacI, some schoIars have
used IhIs sIIuaIIon Io jusIIIy IegaI ersonaIIIy oI Ihe cororaIIon. Zakt wIII be Imosed
on Ihe asseIs oI Ihe comany and wIII Ihen be auIomaIIcaIIy aIIocaIed among Ihe joInI
owners on Ihe basIs oI IheIr shares.
6. The asseIs oI a comany are based on IradIng goods and on Ihose goods IhaI are
noI IradIng goods, buI are used Ior romoIIng Irade: buIIdIngs, IooIs and so on. The
IradIng goods are reecIed In Iwo IhIngs: saIes revenue and InvenIorIes. SaIes revenues
may IncIude acIuaI saIes and renIaIs Ior goods and servIces. RenIaIs Ior goods and
servIces, where goods aIso IncIude reaI esIaIe, have aIready been seIIIed In our revIous
judgmenI. We may now Issue Ihe ruIIng.
l. ThIs Is noI Ihe Iace Io go InIo Ihe deIaIIs oI IhIs Issue. Those InIeresIed my Iook aI our Imran Ahsan
Khan Nyazee, Corporations in Islam (IsIamabad: IederaI Iaw House, 200?) and aIso Imran Ahsan
Khan Nyazee, Partnership in Islam (IsIamabad: IederaI Iaw House, 200?).
2. See, e.g. Ab !bayds Kitb al-Amwal on zakat on joIn asseIs oI co-owners (age 53? onwards, our
IransIaIIon).
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4 Vin1uni Sunninu Coun1 2
2 Tui RuiiNo
7. AII cororaIIons and comanIes, IrresecIIve oI who owns Ihem, wIII ay zakt on
Ihe annuaI saIes/revenues on Ihe assumIIon IhaI Ihe awl has aIready assed.
8. The saIes/revenues may be comosed oI acIuaI saIes Ius renIaIs or aymenIs
receIved by way oI servIces rendered. BoIh are subjecI Io zakt aI 2.5%.
9. InvenIorIes wIII be IIabIe Io zakt II a year has assed on Ihem wheIher Ihese are
InvenIorIes oI nIshed goods or raw maIerIaI. When Ihey are soId In a subsequenI year
Ihey wIII be subjecI Io zakt on saIes Ior Ihe nexI awl.
10. There Is no zakt on shares. Any Income receIved by Ihe sharehoIders wIII be
added Io IheIr ersonaI asseIs and wIII be subjecI Io Ihe awl.
11. The debI owed by Ihe comany, II II Is InIeresI based, wIII noI be Iaken InIo
accounI as Ihe conIracIs based on InIeresI are fsid and cannoI be acknowIedged by Ihe
sharah.
12. AII debIs owed Io Ihe comany as weII as deosIIs, even Ihose based on InIeresI,
wIII be subjecI Io zakt In accordance wIIh Ihe ruIIng Ior debIs In Ihe revIous judgmenI.
AIIah knows besI.
Imran Ahsan Khan Nyazee
Muharram l0, l434
ecember 6, 20l2 January 3, 20l3
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RiiiniNtis
Ab Zayd, Bakr Ibn Abd AIIh. Fatw Jmiah f Zakt al-Aqr. RIy: r aI-Imah,
2000.
BareIvI, Amad RI Khn. Fatw Riawiyyah. VoI. 30. Iahore: RI IoundaIIon,
2006.
Iahm, Amad. aI-ZakI: Wujbuh I Ajr aI-Aqr. Majallat Majma al-Fiqh al-
Islm 2, no. l (2003): l09ll9.
Ksn, Ab Bakr. Badi al-ani f Tartb al-Shari. dIIed by Muammad Adnn
Ibn Ysn arwsh. 6 voIs. BeIruI: r Iy aI-TurIh aI-Arab, 2000.
Sarakhs, Shams aI-AImmah. Kitb al-Mabs. 30 voIs. BeIruI: r aI-MarIIah, n.d.
Nyazee, Imran Ahsan Khan. Corporations in Islam. IsIamabad: IederaI Iaw House,
200?.
. Partnership in Islam. IsIamabad: IederaI Iaw House, 200?.
. The Concept of Rib and Islamic Banking. IsIamabad: NIazI PubIIshIng House,
l995.
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2 Vin1uni Sunninu Coun1 5
Qaradw, YsuI. Fiqh al-Zakah. TransIaIed by Monzer KahI. VoI. 2. Jeddah: KIng
AbduI AzIz !nIversIIy, n.d.
!smanI, Muhammad TaqI. p Zakt Kis Tarah ad Karen? KarachI: Memon IsIamIc
PubIIshers, n.d.
!smanI, M. Imran AshraI, and BIIaI Ahmad QazI. Guide to Zakah: Understanding and
Calculation. KarachI: QuranIc SIudIes PubIIshers, n.d.