If you own a business, certain assets are subject to Zakat — but not all of them. Here's how to determine what counts and how to value it.
Zakat on Business Assets
If you own a business, certain business assets are subject to Zakat. Only zakatable business assets are included — not fixed assets like equipment or real estate used in operations.
All schools agree that trade goods (inventory), business cash, and receivables are zakatable. Fixed assets used in the business — buildings, machinery, vehicles — are not zakatable. The key principle is: assets held for trade or that represent liquid wealth are subject to Zakat.
Business Cash
Business cash is zakatable just like personal cash. Include all business bank accounts, operating cash, and petty cash.
There is no distinction between personal and business cash for Zakat purposes if you are a sole proprietor. For partnerships, calculate based on your ownership share.
Inventory & Trade Goods
Inventory and trade goods represent wealth intended for sale and profit. They are always zakatable at their current market value. This includes raw materials, work-in-progress, and finished goods intended for sale.
Scholars differ on whether to use retail or wholesale value:
- Retail value — value inventory at the current sale price, representing what you would receive if sold. This is the position of the National Zakat Foundation (UK).
- Wholesale value — value inventory at the replacement cost or purchase price. The National Zakat Foundation (Canada) holds that this is sufficient.
Both positions are valid. The calculator supports both approaches.
Accounts Receivable
Money owed to your business by customers is part of your wealth, similar to personal loans given.
An important distinction applies: money owed for goods delivered is generally considered zakatable while outstanding, whereas money owed for services rendered is not zakatable until payment is received.
Accounts receivable that are expected to be collected are treated like strong loans — they are zakatable. Write off any doubtful accounts before calculating.
Business Deductions
Business debts follow similar principles to personal debts. Key deductible items include:
- Credit card balances, rent, utilities, and bank overdraft (short-term)
- Accounts payable to suppliers
- Payroll owed to employees
- Contractor invoices
- Taxes currently due
For long-term business debts (mortgages, equipment financing, investment loans), there are two approaches:
- Annual payment method — deduct the total loan payments due in the coming year. This is preferred by many scholars for business calculations.
- Monthly payment method — deduct only the current month's payment, with future payments addressed in future years.
Ownership Percentage
If you co-own a business, calculate Zakat based on your ownership percentage. For example, if you own 50% of a business, include 50% of the business's zakatable assets. There is no distinction between personal and business cash for sole proprietors — for partnerships, calculate based on your ownership share.
The calculator's business assets section handles inventory valuation methods and ownership percentages automatically.
Sources
- National Zakat Foundation UK — Business Assets — supports retail value for inventory
- National Zakat Foundation Canada — Inventory Valuation — supports wholesale value