صدق الله العظيم - سورة التوبة آية (129)

"Take Sadaqah (alms) from their wealth in order to purify them and sanctify them with it" 9-129

Introduction


Simplifying knowledge and making it accessible to all is one of IIID’s goals, and this pamphlet helps serve that purpose. Zakat “calculation” is a simple practice, and should be maintained as such. This pamphlet is written keeping in mind Muslims living in western countries. Such Muslims are no longer considered “living” in the West; many are already westerners by birth and culture. Hence a compatible perspective is used when selecting suitable jurisprudence choices. For example, we encourage and select the Fiqh opinion that requires Zakah funds to be distributed within the local communities rather than transferring them far to another locality. This selection is a strategic choice that is intended to set precedence in how Western Muslims are shaping some Islamic practices in order to be compatible with their mission, vision and the laws of the country they are living in. We believe that the above spirit is not a one-time transient adaptation, but rather a deep social and religious current that will get more entrenched and powerful with time. This trend is worthy of being properly referenced, and this pamphlet is a modest attempt at achieving that. We are confident that Muslims living in Western countries will end up shaping modern Islamic thinking to the extent of assuming a leadership role. Leadership implies being pioneers in finding new ways to positively integrate the Muslim identity with Western democratic institutions. Hence, some of the Fiqh opinions noted here might be new to some. In the end, this remains to be a human effort, and mistakes are possible. We ask Allah (SWT) to reward our intentions, and forgive our shortcomings.

IIID Fiqh Committee

Fixed Assets:

• Not for Profit: Residence, Cars, patents, copyrights, for regular or leisure use are not Zakatable.

• For Profit: The items are not zakatable, but their net profits are, upon completion of a year of usage of the asset itself. Regardless of whether the revenuegenerating asset was paid for, or owned though mortgage, such debt does not alleviate the Zakah liability as usually is the case with debts. However, mortgage payments on capital and interest are considered to be expenses to be deducted from gross revenues.

Cash, RRSP, RESP, Stocks

• Whether banknote, a balance in a bank account, or an investment; less personal debts is Zakatable.

• RRSP: It is an asset but the zakatable value needs to be calculated. Due to tax laws, if the RRSP was liquidated, a significant withholding tax will be levied. Hence only the amount net of this tax is zakatable.

• RESP: In principle this account is held in a revocable trust for a beneficiary child or more. Even though if held to its maturity, the effective value of the trust account would be greater than its value if liquidated now, yet Zakat applies to current effective value, not the potential future one. Hence, if an RESP is liquidated, the government grants are reversed, capital gains tax applies if profits were not rolled over to an RRSP. The remainder is Zakatable.

• Stocks: Whether held inside or outside of an RRSP or RESP, our view is that due to their high price volatility, Zakat is to be retroactively paid only when sold and a gain is realized. Most other investments are a lot less volatile, and can be liquidated before substantial losses. In case of stocks, losses can be inflicted promptly, without giving the holder a chance to liquidate and preserve his unrealized gain, or capital.

Distribution Channels


The deserving recipients of Zakat money are:

• The cause of Allah: We believe this was meant to provide flexibility for supporting any, and new, ways to spreading the word of Allah.

• The poor: who cannot break even.

• Zakat administrators: whether to pay salaries or administration costs, it should be capped at 1/8th to protect from abuse and inefficiencies being billed to Zakat payers.

• Debtors: Those shouldering indispensable debts threatening them with serious legal liabilities.

Zakat & Taxes


Zakat supports those underprivileged society members whom the system did not provide with sufficient sustenance. As well, Zakat helps finance projects otherwise not fully, or partially, funded from other sources. Even though taxes finance some areas that may partially overlap with those of Zakat, we view that those two concepts are generically different and that taxes cannot be deducted from due Zakat amounts.

Zakat & Interest Earned


Interest earned from idle or invested cash could be donated for distribution through Zakat channels. We prefer that cash does not sit idle, and that any interest should be donated.