1. ZAKAH SEMINAR
RAMADAN 1437 – JUNE / JULY 2016

2. CONTENTS The Quran and Sunnah Distribution of Zakah
Framework of Zakah and basis of calculation
Types of assets and methodology of calculating Zakah
Miscellaneous
Illustrations
Conclusion
Questions

3. INTRODUCTION Everything in Islam starts with intention
Essential Pillar of Islam
Act of Zakah is an expression of gratitude
Purpose of Zakah
Means of spiritual purification
To purify ones wealth
Develops a relationship between the giver and the recipient
Plays a role in Islamic economy

4. FROM THE QURAN AND SUNNAH
The word Sadaqah (zakah) occurs 30 times and in 27 occasions it is linked with the word Salah.
“Take Sadaqah from the Amwal (wealth) and cleanse them.” (Surah Taubah verse 103)
The distribution of Zakah and the deserving categories are determined in Surah Taubah, verse 60.
Verses that refer to specific types of assets on which zakah is leviable. – 9:34/6:141/2:267/6:141

5. FROM THE QURAN AND SUNNAH
From the Sunnah of the Prophet (SAW) :
The Sunnah of the Prophet (SAW) gives us the detailed specification of assets subject to Zakah, the exempt portion, and the applicable rates.
Narrated by Ibn Abbas: “Inform them that Allah has obliged Sadaqah to be collected from the rich and rendered to the poor, and pay Zakah on your wealth.”
- Sahih Bukhari
Narrated by Abu Huraira: Allah’s apostle said: “No Zakah is obliged on a Muslim’s slaves and horses.” Sahih Bukhari

6. BENEFICIARIES OF ZAKAH
The poor
The needy
Administrators of Zakah
Those whose hearts are being reconciled
People in debt
In the cause of Allah
The wayfarer
Emancipation of slaves

7. CATEGORIES TO WHOM ZAKAH CAN NOT BE PAID
The rich
Those capable but not willing to work
Disbelievers and apostates who fight against Islam
Children, parents and wives of the Zakah payers
The family of the Prophet (S.A.W)

8. IMPOSITION OF ZAKAH
Jurists agree that Zakah is compulsory on the surplus wealth of every Muslim who is sane and who owns the minimum nisaab
Only applicable to Muslims
Must take individual responsibility
Be definitive of ownership of wealth

9. WHEN IS ZAKAH DUE
Four conditions before Zakah becomes due …
Nisaab
Haul i.e. the passage of a year
Ownership
Growth

10. Objective of Zakah Calculating Zakah Distribution of Zakah
Nisaab
Nisaab refers to the minimum net amount (Zakah assets minus liabilities) of wealth a person must have before Zakah becomes obligatory.
Haul
Ownership
Growth

11. NISAAB
Dirham Silver
Dinar Gold

12. NISAAB CALCULATION 612.36g of silver SILVER = R10.11 X 612.36g
NISAAB = R6,190.96
As of 24 June 2016

13. Objective Calculating Zakah of Zakah
Distribution of Zakah
Nisaab
Haul, refers to the period, usually an Islamic year, that one must posses the Nisaab amount.
Therefore determine your commencement date to calculate the Islamic year.
Haul
Ownership
Growth

14. UNDERSTANDING NISAAB / HAUL
Assume Nisaab to be R5,000
1 Ram 1435
1 Ram 1436
STATUS
PAY ON
R20,000
R3,000
R5,000 A B D C
No liability
No liability
Liable to pay
R5,000
Liable to pay
R20,000
SANZAF ZAKAH SEMINAR

15. Ownership must be absolute.
Objective
of Zakah
Calculating Zakah
Distribution of Zakah
Nisaab
One must have full ownership of the Zakatable asset before Zakah is due on it.
Ownership must be absolute.
Test – are you able to dispose of the asset freely; was the investment made voluntarily?
Haul
Ownership
Growth

16. Objective Calculating Zakah of Zakah
Distribution of Zakah
An asset will only be subject to Zakah if it has the potential to grow or increase in value.
Therefore capital assets (*property, plant and fixtures) and assets for private use are not subject to Zakah.
*differences of opinion exist
Nisaab
Haul
Ownership
Growth

17. METHOD OF CALCULATION
Abu ‘Ubayd reports from Maymun ibn Mihran:
“When Zakah is due, calculate the amount of money (on hand), add to it the value of the goods and the amount of debts on customers that you expect to be paid, make a sum of the total, deduct whatever debts you owe to others, and pay Zakah on the net amount.”
Al-Hasan al-Basri reports similarly except he does not mention deduction owed to others!

18. 2.5% RATE APPLICABLE Narrated Ali ibn Abu Talib:
Al-Harith al-A'war reported from Ali that Zuhayr said: I think, the Prophet said: "Pay a fortieth. A dirham is payable on every forty, but you are not liable for payment until you have accumulated two hundred dirhams. When you have two hundred dirhams, five dirhams are payable, and that proportion is applicable to larger amounts.
- Sahih Bukhari

19. TYPES OF ASSETS AND THE METHOD OF CALCULATING ZAKAH ON IT
Money
Listed Shares and Unit Trusts
Policies
Pension, Provident Fund and Retirement Annuities
Gold and Silver
Business Assets
Stock
Debtors

20. ZAKAH ON MONEY
Cash: All modern types of currencies that represent a measure of acceptable value are Zakatable. In the case of foreign currency a calculation must be done to determine if the equivalent value in local currency will suffice.
Wherever practical, exclude the interest accrued.
Bank Accounts: Irrespective of the terms and conditions and/or purpose with which the bank account was opened, the balance in your favour is subject to Zakah.
 Wherever practical exclude the interest accrued.

21. ZAKAH ON LISTED SHARES & UNIT TRUSTS
Listed shares (or similar assets eg. Unit Trusts) are as good as cash in the hands of the owner thereof and are thus subject to Zakah at the market value.
Technically, Zakah should be paid on the assets of the company that are subject to Zakah, (e.g. inventory, cash, etc.). However, as it is not practical or easy to identify these assets, Zakah is paid on the market value of the share as quoted on the stock exchange, etc.

22. ZAKAH ON POLICIES
Most conventional Policies are impermissible, i.e. they are not Shariah compliant. However, the amounts receivable are sometimes subject to Zakah.
If the policy has a surrender or termination concession, then such (surrender or termination) value is subject to Zakah each year.
For non-Shariah compliant funds: Pay Zakah on the lesser between the premiums paid and the surrender or termination value each year.
For Shariah compliant funds: Pay Zakah on the surrender or termination value each year.

23. ZAKAH ON PENSION / PROVIDENT FUNDS & RETIREMENT ANNUATIES
Pension / Provident funds and RA’s are similar to the extent that they are a form of savings for the future. However, they differ that while pension and provident funds are generally a condition of employment, RA’s are taken up voluntarily.
The compulsory VS voluntary nature of how the item came to be makes pension and provident funds not subject to Zakah while RA’s are subject to Zakah on their current value.

24. ZAKAH ON GOLD AND SILVER
Only the Hanafi Madhab obliges Zakah on all gold, whether it is acquired for personal use, re-sale, investment, capital or if it is used as a tool of trade.
The Shafi, Hambali and Maaliki Madhabs on the other hand view gold and silver jewellery belonging to women and used for personal adornment as exempt from Zakah.
Zakah is payable on the value of the weight of gold and silver, irrespective of its form.

25. ZAKAH ON BUSINESS ASSETS
Zakah is paid only on those business assets that are liquid or circulating e.g. cash, stock and debtors.
Buildings, fixtures, equipment and vehicles: These items are not acquired for resale
No Zakah is levied on investment properties*.
*differences of opinion exists

26. ZAKAH ON STOCK
Trade goods are those items that are acquired or purchased with the intention of reselling them.
Valuation of trade goods: It is agreed that the most practical way of pricing trade goods for Zakah is for the payer to use the lower of its cost or net realisable value.

27. Trade Debtors / Loan Debtors (cash loans)
ZAKAH ON DEBTORS
Trade Debtors / Loan Debtors (cash loans)
Zakah is payable on the amounts owing each year if the debtor is sound and able to pay the debt.
However, if the debtor is in financial hardship or if he deliberately delays payment then Zakah is only payable on the debt upon receipt thereof, in the year of receipt, i.e. once.

28. LIABILITIES*
Liabilities or monies owed by you are sometimes deductible from the total value of assets subject to Zakah before calculating ones Zakah.
How to treat liabilities for Zakah purposes:
If one is calculating Zakah before payment of ones normal/regular monthly expenses, then such normal/regular monthly expenses may be deducted from cash on hand and Zakah will be calculated on the balance after deductions.
Do not deduct the full amount due on long- term liabilities, for example on home-loans or vehicles. However one may deduct the current instalment due as per above.
Merchants may deduct the full amounts due to their suppliers before calculating Zakah.
* Various Madhabs offer different methods on how to treat liabilities, from not allowing any deductions to deducting all liabilities. Please consult an Aalim

29. MISCELLANEOUS Zakah on:
Wealth held in private companies, CC’s, partnerships
Wealth held in Trust – inter vivos/testamentary
Wealth of children
Wealth in an estate being wound up
Empowerment / Incentive Scheme Assets

30. MISCELLANEOUS Payment of Zakah in kind
Zakah payment in advance / deferred
Unpaid Zakah in respect of prior years
Unpaid Zakah due to incorrect calculations
Special rules apply to agricultural products, minerals and sea products

31. ILLUSTRATION OF CALCULATION
ASSETS
Residential Property(MV) R1,000,000
Bank Balance R ,000
Unit Trust R ,000
Car R ,000
Jewelry R ,000
Gold Coins R ,000
Total R1,430,000
LIABILITIES
Credit Card R ,000
Bond R 170,000
Total R 175,000

32. ILLUSTRATION OF CALCULATION
ASSETS
Residential Property(MV) R1,000,000
BANK BALANCE R ,000
UNIT TRUST R ,000
Car R ,000
Jewellery R ,000
GOLD COINS R ,000
Pension Fund R 800,000
Total R2,230,000
LIABILITIES
CREDIT CARD R ,000
Bond R 170,000
Total R 175,000
Zakah Payable R9,125 (2,5% X (50, , ,000 – 5,000))

33. ILLUSTRATION OF CALCULATION – RENTAL PROPERTY
INCOME
Rent Received R ,000
EXPENSES
Rates R ,000
Interest R ,000
Electricity R ,000
Repairs & Maintenance R ,000
Net Income R ,000
Net salary Income R ,000
Total Income R ,000
ASSETS
Cost of Property R2,000,000
DEBTORS – TENANTS R ,000
BANK BALANCE R 300,000
Total R2,380,000
LIABILITIES
CREDITORS (RATES&ELECT) R ,000
Bond R 1,100,000
Total R 1,140,000
Zakah Payable R8,500 (2,5% X (80, ,000 – 40,000))

34. ILLUSTRATION OF CALCULATION – BUSINESS ASSETS
Buildings R 1,000,000
Fixtures & Fittings R 1,000,000
Plant R ,000
Motor vehicles R ,000
Stock R 1,350,000
Debtors R 1,100,000
Cash R 1,150,000
Total R 6,300,000
LIABILITIES
Trade Creditors R 1,250,000
Taxes (VAT, PAYE) R ,000
HP Debt (long term debt) R 1,400,000
Total R 2,730,000

35. ILLUSTRATION OF CALCULATION – BUSINESS ASSETS
Buildings R 1,000,000
Fixtures & Fittings R 1,000,000
Plant R ,000
Motor vehicles R ,000
STOCK R 1,350,000
DEBTORS R 1,100,000
CASH R 1,150,000
Total R 6,300,000
LIABILITIES
TRADE CREDITORS R 1,250,000
TAXES (VAT, PAYE) R ,000
HP Debt (long term bebt) R 1,400,000
Total R 2,730,000
Zakah Payable R56,750 (2,5% X (1,350, ,100, ,150,000 – 1,250,000 – 80,000))

36. CONCLUSION 1,7 Billion Muslims worldwide Zakah – Unique system
Can be an effective tool in economic, social and political processes
In SA estimate of Zakah collectable is R1BN - R1,5BN
Trend is towards a developmental approach
Your Zakah calculation
About SANZAF

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38. ABOUT SANZAF
SANZAF is a leading Zakah institution in Southern African region that is existence for 42 years
It operates from 31 offices nationally and employs 110 staff
For 2014/2015 distributed and expended R112, 5 million (audited)
For 2015/2016 expected to have distributed and expended R135 million
Cost to income ratio 2014/2015 we have 16,5% (audited)
It observes strict corporate governance practices
Programmes are focused on providing development and relief to those in need with at least 50% of the budget allocated to developmental focus
Has obtained international recognition for its management of Zakah

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