Do I Pay Zakat on Foreign Property?

Shaykh Abdurrahim Reasat answers a question related to the payment of Zakat on foreign property (according to the Hanafi school of thought).

 

Question:

Assalamu alaikum wa rahmatullahi wa barakatahuh

Hope you are well. I have a question re. zakat. My family has put a property abroad under my name – presumably to avoid problems of transfer when it comes to future inheritance. It is currently leased to a business who pay rent but in reality, I don’t consider the money as my own as, in effect, it is under the control of my family. Do I need to pay zakat on this? It’s not a matter I feel entirely comfortable with even though I understand why it has been done but I
don’t want to create problems. Concerning my own earned income, I am not eligible for zakat but if I have to incorporate the foreign rent, I may be even though I don’t use it. I would really appreciate an answer, especially as I can imagine other second-generation immigrants may be in similar situations.

Jazakallah khayrun

 

Answer:

Wa ‘alaykum as-salam wa rahmatullah wa barakatuh

I pray you are well.

Zakat is only due on wealth or property which has the potential for growth. This would include any property purchased with the intention of sale or to acquire rental income. As such, zakat would not be due on the property if it was not purchased with intention of sale. The rental income, however, is zakatable. (Mawsili, Al Ikhtiyar).

Ownership of the Property

Whether you owe zakat on the rental income or not is dependant on who the actual owner is. When the property was transferred to you was it done with the intention of making you the owner of it, such that if you decided to sell it you would be able to do so?

You need to gentle clarify the matter with your family. Make it clear to them that you do not want to cause friction, and then explain that there are religious ramifications to owning the property – if you are indeed the owner. You need to know so you can pay the zakat on the rental income – which is rightfully your if you own it, even if you do not spend it. If they say it is yours then you can deal with the situation in the manner you deem to be the best for all involved.

If the property is only in your name for another purpose then you do not have to pay the zakat on the rental income. The actual owner is responsible for this.

Clarity In Matters of Inheritance 

Inheritance is a serious affair in Islam. When a person dies his property automatically becomes the property of his next of kin – with the exception of funeral costs and the repayment of debts which are both given precedence. It is up to the heirs to see that it is distributed accordingly.

Non-Shari’a compliant distributions before death, and vague allocations can be the cause of a lot of problems، and even fighting، between the next of kin. Therefore, it is best to have all such matters clarified beforehand.

Not following the distribution detailed in the Qur’an has serious consequences in this world and the next. I heard Shaykh Ali Hani, whose family were originally from Palestine, say on a number of occasions that before the country was occupied, it was common for Palestinian families not give anything of the inheritance to the daughters. They thought that the money would end up going to another (her husband’s) family, and they preferred to keep it in their own. This practice was rife. Could it be that what happened to the country was a test from Allah because of this?

Speak to your family and get clarity. It will make things much easier later on.

May Allah grant you the best of both worlds.

Abdul-Rahim

 

Checked and approved by Shaykh Faraz Rabbani


Zakat on Six Months Advance Rent

Ustadh Tabraze Azam is asked how to calculate zakat on advance rent.

My zakat will be due soon.  In the following situation would you please kindly inform me on whether I would pay zakat on the full rent and deposit or not?

I renewed my tenancy last week for another six months and, as before, because I’m not in employment I have to pay the full amount upfront plus the security deposit, which they already have from when I started renting.

Rent: £675/mo. Six months total: £4,050. Security Deposit: £800.

Last year I did as I was unsure.  It would be helpful to know what the actual ruling on this would be. I pray you will advise me please.

Wassalam

No, you do not need to pay zakat on the rent you have paid your landlord for your home.

The principle is that zakat is paid on assets owned. As you have paid your rent up front, the money has left your ownership, and it is thus no longer included in your zakat calculations.

As for the security deposit, you would include it in your zakatable assets. This is because it is merely a deposit, and you aren’t transferring ownership of that money to the landlord.

Note that if you are in possession of the zakatable minimum (nisab) and you then proceed to pay zakat which you think is due, when it actually isn’t, you can consider that amount to count towards a future payment of zakat. Hence, if you unduly paid extra last year, you can assume it was forwarded to this year.

Please also see Is Your Zakat Due? – A Reader and Resources on Giving Zakat.

And Allah Most High knows best.

Wassalam,

Tabraze Azam

Checked and approved by Shaykh Faraz Rabbani.

How to Pay Zakat on Trade Goods?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

If I buy 1000 pieces of trade goods for 1€ each, do I have to pay zakat on the market value? Let’s say the sales price is 7€. Does it mean that I have to pay zakat on 7000€ ?

How should I count the sales tax or other expenses like selling on ebay who requires you to pay a percentage of the sales price to them?

Answer: Wa alaikum assalam wa rahmatullah,

Generally, and with regards to calculating the net worth of trade goods in your possession, you should use their current market value.

Note that there are usually three sets of valuation: (1) the cost or wholesale price, which is the price you most likely paid to purchase the goods, (2) the current market value, and (3) the retail price, which you listed in your question as the sale price, namely, something which can be self-determined.

If there are liabilities which are due, whether for the purposes of tax or other general overheads, these can be deducted when calculating your net zakatable assets.

Please also see: Is Your Zakat Due? – A Reader and Resources on Giving Zakat and: Zakat: A Comprehensive SeekersHub Reader and: Years of Past Due Zakat, and Zakat on Non-Selling or Damaged Trade Goods

And Allah Most High knows best.

wassalam,
[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

Should I Pay Zakat on Investments I Have Made?

Answered by Shaykh Umer Mian

Question: Assalamu alaykum

I have a certain amount of cash that I have given to my friend to invest in his business, I had that amount for a year with me and then transferred it to him to invest. Does this wealth require zakat to be paid? And currently, I am unemployed and don’t have any other source of income.

Answer: Wa alaikum as-salam wa rahmatullahi wa barakatuhu

Short answer:

If you intended to transfer ownership of those funds to your friend, your friend pays the zakat. If you intended your friend to merely act as an agent (wakeel) to invest the funds on your behalf, then you pay zakat on those funds. Whoever has to pay the zakat should calculate it according to the method detailed below.

Detailed Answer:

First of all, the principle underlying the obligation of zakat has been summarized as follows:

“Zakat is only due if one possesses a net zakatable amount above and beyond one’s debts and immediate (one-month) expenses after a zakat-year has passed since first possessing such an amount.” (Shaykh Faraz Rabbani, may Allah preserve him, in one of his past answers).

Secondly, there are two parts to your question. The first pertains to the year you were in possession of the cash, prior to giving it over to your friend. During that year, the cash you had must certainly be counted from your assets. You should do the calculations described below to determine whether you owe zakat for this year.

The second part of your question pertains to what happens after transfering the cash to a friend to invest. Based on your intention at the time of transferring the funds, the following is possible: A) you intended to make your friend your agent (wakeel) to invest the funds on your behalf, or B) you intended to transfer ownership of the funds to your friend. In latter scenario, the funds would be considered a gift (hibah) and your friend would become the owner of the funds from the time of transfer. Hence, after the transfer, no zakat would be due on you in relation to those funds. Rather, your friend would have to calculate and pay zakat on those funds from that point on.

Since you have asked regarding your own zakat obligation, it seems more likely that you intended scenario A. That is, the friend is merely acting as an agent (wakeel) on your behalf, while the funds remain yours. In this case, you must calculate and pay zakat on those funds, in the same way as described above. One must always remember that paying zakat from any given wealth is the responsibility of the owner of that wealth (malik), and not the responsibility of the one to whom it is given for a specific duration. Phyiscal possession is not necessary for the obligation of zakat. Rather, if one has full control over the funds and they are redeemable whenever one desires, the funds are considered to be in one’s possession and zakat will due on them.

Lastly, you have indicated that you are unemployed without any other source of income. Even in that situation, zakat may still be due. In order to determine zakat due, you must add up your zakatable assets for a given year. Zakatable assets include cash, bank balances, investment and retirement accounts, gold, silver, and trade goods (i.e. goods purchased for resale, not for personal use). Any property acquired for personal use (including homes, cars, furnishings, personal effects, etc.) is not from one’s zakatable assets. From the total zakatable assets, subtract your debts, including immediate (one-month) expenses for yourself and your dependents. If the resulting amount is more than the nisaab, then you must pay 2.5% of that amount as zakat for that year. Note that the nisaab is the minimum amount of wealth upon which zakat is due, and it equals 612.32 grams of silver or about $302 (according to the current market price for silver).

Wassalam,
[Shaykh] Umer Mian

Should I Include Loans When I Calculate My Zakat?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

I needed money, and one of my relatives helped me out. He is happy to get the money back (if I can ever repay), and he is happy if I don’t repay.

Is zakat calculated on this? It is a confusing matter as I’m not financially well off, and while I pray I can repay, it is possible I may never be able to. If Allah opens my income gates, I may be able to. No clue. It is a very very large amount.

Time passes. What to do about this?

Answer: Wa alaikum assalam wa rahmatullah,

If he loaned the amount of money to you, it would be considered a debt owed to him.

If he merely gifted the amount to you, or forgave the “loan,” then it would be owned by you fully. Consequently, you would add it to your other financial assets and pay zakat the next time your due date comes around.

If you did not own the zakatable minimum (nisab) before this gift, or you did not have a zakat due date, the date the money was received would be your new zakat due date, assuming you have no other debts and the like. Hence, you would owe zakat the following lunar year.

[Shurunbulali, Maraqi al-Falah, with Tahtawi’s Gloss (2.391)]

Please also see: Is Your Zakat Due? – A Reader and Resources on Giving Zakat and: Zakat: A Comprehensive SeekersHub Reader and: Zakat Calculator

wassalam,

[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

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Can Me and My Family Pay Our Zakat Together?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

Should me and my child pay our zakat separately? Or can we pay it together?

Answer: Assalamu alaikum wa rahmatullah,

Zakat is a personally obligatory duty. Hence, the basis is that each person would make their own payments.

However, it is possible for you to pay zakat on behalf of a spouse, child or another person by summing the total zakat assets owned [gold/silver/cash/trade goods] and then giving the relevant amount.

Note that paying zakat on behalf of somebody else does not necessitate that you need to take money from them. Rather, your paying on their behalf would count as akin to a gift to them which they subsequently used to make the zakat payment.

[Kasani, Bada‘i al-Sana‘i; Ibn ‘Abidin, Radd al-Muhtar ‘ala al-Durr al-Mukhtar (1.237)]

Please also see this answer.

And Allah Most High alone knows best.

wassalam,

[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

How Should the Zakat on a Rental Income Be Calculated?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

If one has a rental property, the zakat due at the end of the lunar year is on the rental income, not the property value or original capital.

What if the monthly or quarterly rental income is totally spent before a full lunar year ends?

Answer: Wa alaikum assalam wa rahmatullah,

The rental income, if any, is simply included with your other assets on the day your zakat is due. There is no expectation to calculate all earnings and the like because zakat is a charity paid on what you own on your due date alone. Hence, if there is nothing to include, you don’t need to do anything more.

Please also see: Is Your Zakat Due? – A Reader and Resources on Giving Zakat and: Zakat: A Comprehensive SeekersHub Reader

And Allah Most High alone knows best.

wassalam,

[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

Do I Have to Pay Zakat on a House?

Answered by Ustadh Tabraze Azam

Question: Assalam alaykum

My brother and I inherited our parents house after their death.
We plan to sell it as soon as we get a suitable offer for it. It may take some years due to formalities. It is unoccupied as it cannot be rented out.

Do we have to pay zakat on this house every year?

Answer: Wa alaikum assalam wa rahmatullah,

There is no zakat due on residential properties or otherwise.

Personal possessions and property are not subject to zakat. However, the money which you receive from the sale of property and the like is zakatable, and hence, you would subsequently include those funds with your other assets.

Please also see: Is Your Zakat Due? – A Reader and Resources on Giving Zakat and: Zakat: A Comprehensive SeekersHub Reader

And Allah Most High alone knows best.

wassalam,

[Ustadh] Tabraze Azam

Checked and Approved by Shaykh Faraz Rabbani

Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.

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