Friday 4 Rabi‘ al-awwal 1444 - 30 September 2022
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Zakaah is due on factory products and on raw materials intended for manufacturing

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Publication : 15-08-2022

Views : 497

Question

I have a factory that produces soap, and its capital is composed of the following: 1. Fixed assets in the form of buildings, land, machinery, equipment and cars. 2. Stock of unprocessed raw materials. 3. Stock of ready-for-market products. 4. Current balances in banks. My question is: how should I pay zakaah on this factory? (I hope that you will explain in detail).

Answer

Praise be to Allah.

Firstly:

Zakaah must be paid on gold, silver and cash, and also on trade goods, livestock and anything extracted from the ground. It is not paid on buildings, machinery and land, unless they are intended for sale.

Based on that, no zakaah is due on the fixed assets that you own, namely the buildings, land, machinery, equipment and cars.

Zakaah is due on the products that are ready for market, and also on the raw materials, because they were bought with the intention of processing them and trading in them. The way in which their zakaah is to be worked out is to work out the value of the processed materials and the raw materials, according to the market price when one Hijri year has passed, then give one quarter of one tenth (2.5%) of that amount. See question no. 69916 and 74987 .

Zakaah must also be paid on the balances in the bank. So you should look at what is in the bank accounts when one Hijri year has passed, then give zakaah on that. The rate that is due is one quarter of one tenth (2.5%).

Zakaah must also be paid on debts that are owed to you by others, if they acknowledge those debts and agree to pay them, meaning that they do not deny them and are not in financial difficulty. You should give zakaah on these debts when one full Hijri year has passed.

With regard to debts that you owe, if there are any, they do not have any impact on zakaah and are not deducted from it, according to the more correct scholarly view.

Please see also the answers to questions no. 119047 and 93101 .

And Allah knows best.

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Source: Islam Q&A