Question # 498: I am a divorcee sister with two children. I have invested certain sum of money (say USD 20k) in my one of my close relative’s manufacturing business for which he pays me monthly certain amount (say USD 3k) based on his monthly profits from last 3 years and I have no intention of taking that money back from him anytime soon. On what amount do I need to pay zakat, if any?

bismi-llahi r-raḥmani r-raḥīm,

Assalamu ‘laikum warahmatullahi wabarakatuh,

All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).

Dear questioner,

First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.

Shorter Answer: Since your situation can be compared to the one who holds shares in the company with the intention of benefiting from the annual profits of the shares (and not for the purpose of trading in those shares), you should pay the zakah similar to that paid on things that are rented out. The owner of these shares does not pay zakah on the value of the shares/investments, rather pays zakah on the profits (in your case the monthly profits received from your relative), which is 2.5% after one year has passed from the day when one acquired that profit.

Long Answer: If the person has invested in the company with the intention of getting a benefit from the yearly revenue of the shares and not with the intention of trading, then zakah is similar to that of immovable properties such as real estate and non-agricultural lands. This ruling means that there is no zakah on the share itself. But the zakah is obligatory on the yearly earnings of the stock and it is 2.5 percentage from the revenue after the passing of a year from the time this revenue was owned, provided all the conditions of zakah are met and there is nothing contradicting it. This is only if the company’s shares are permanent assets like real estates, factories, boats, … etc. But, if the shares are goods the zakah is due on both the capital and the benefit. (Islamweb.net, a web site belonging to the Ministry of Awqaf and Islamic Affairs in the State of Qatar)

If [the shareholder] holds shares in the company with the intention of benefiting from the annual profits of the shares, and not for the purpose of trading in those shares, then he should pay the zakah similar to that paid on things that are rented out, in accordance with the resolution of the Islamic Fiqh Council (Majma’ al-Fiqh al-Islami) passed during its second session, with regard to the zakah on real-estate and non-agricultural land that is rented out. The owner of these shares does not pay zakah on the value of the shares, rather he pays zakah on the profits, which is 2.5% after one year has passed from the day when he acquired that profit, bearing in mind the conditions of zakah and provided that there are no impediments. (Islamqa.info)

According to Dr. Main Khalid Al-Qudah, Member of the Fatwa Committee of Assembly of Muslim Jurists in America: “It depends on the nature of her relative’s business. If he is a merchant and used her money in buying commodities, then zakah is due on the wholesale market value of the commodities or merchandise, along with whatever cash she has in Ramadan that came from that business. Otherwise, if the business of her brother is not trading (buying and selling commodities), then… [her] situation can be compared to the one who holds shares in the company with the intention of benefiting from the annual profits of the shares (and not for the purpose of trading in those shares), then [one] should pay the zakah similar to that paid on things that are rented out, in accordance with the resolution of the Islamic Fiqh Council (Majma’ al-Fiqh al-Islami) passed during its second session… The owner of these shares does not pay zakah on the value of the shares, rather he pays zakah on the profits, which is 2.5% after one year has passed from the day when he acquired that profit.”

(The shorter version of the above answer has been verified and approved by Dr. Main Khalid Al-Qudah)

Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.

Wassalaam