Date : 22-02-2017

Question :

How should the Zakah of shares, in Mudarabah(co-partnership) transaction or in long-term investment, be paid?

The Answer :

All perfect praise be to Allah, The Lord of The Worlds, and may His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Zakah (obligatory charity) is due on all kinds of wealth, whether cash, items of merchandise or shares of a certain company since shares are an indefinite cut in the company issuing them; consequently, whoever buys them for Mudarabah transaction is obligated to pay their Zakah as items of merchandise because they are an invested cut. Accordingly, the Mudarib (co-partner) should assess his shares according to their market value, whether equal to, more, or less than the price for which they have been bought, and pay (2.5%) for Zakah at the end of each lunar year. However, if he bought the shares to make an annual revenue, or what is called "long-term investment" then he should add their annual profit to any assets liable for Zakah, such as cash, debts, items of merchandise, then pay (2.5%) for Zakah at the end of every lunar year.

Moreover, if the company is experiencing a deficit, where its debts exceeded its assets, and the shares weren`t intended for Mudarabah, then no Zakah is due because no assets are liable for Zakah and no profit is made. For more details on this, please refer to Resolution No. 28 (3/4) by the International Islamic Fiqh Academy during its 13nth session. And Allah knows best.