Fatawaa


Fatwa Number : 3491

Subject : Ruling on Zakat of Amounts Retained in Letters of Credit

Classified : Current Issues concerning Zakat

Fatwa Type : Search Fatawaa


Question :

I purchase commodities from abroad via an Islamic bank where I deposit a certain amount of money in the trust account. However, one full lunar year has elapsed over that amount and, still, the commodities haven`t arrived yet. How should I calculate the Zakat of that amount?


The Answer :

Praise be to Allah the Lord of the Worlds.

Commodities imported using letters of credit are bought under a Murabaha contract, then the customer takes possession of them after the documents arrive and the sale contract is concluded with the bank. During that process, a certain amount maybe retained until the conclusion of the deal.

While retained, that amount remains in the possession of the customer until he pays for the commodities and receives them or their documents. Therefore, the customer should give the Zakat due on that amount if one full lunar year passes while it is in his possession since possession is the cause that makes Zakat obligatory. Moreover, no possession means Zakat isn`t obligatory, so Zakat is due on customer`s commodities once they are in his possession.

The thirty-fifth standard of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) states, "In commodities imported via letters of credit, retained amounts, other than the expenses of opening that credit, are liable for Zakat, and once the commodities are in the possession of the customer, their Zakat should be paid in accordance with their market price." And Allah the Almighty knows best.




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