This covers all cash money allocated for the business regardless of whether this money will be used for importing commodities from abroad or purchase from the local market. Fixed assets include buildings, cattle, agrarian crops, or food stock and the like. Also, goods stocked in a commercial store owned by one individual or a group of people are included. All of these properties are called commercial assets in use.

As for industrial firms, the tools used in them are not classified among commercial assets. The same applies to the contractor companies which are involved in the works of building and constructing and similar works of carpentry and smithery. These firms are counted as industrial ones. However, if such industrial firms purchased any goods or materials to be sold after being manufactured, there should be a due Zakat on them.

The Difference Between Personal Effects and Commercial Commodities:

The personal effects are those articles that one intends to keep for personal use, and not for sale or trade transactions. This is known in financial accounting as fixed assets. Such assets are bought, by business men or commercial companies, to be kept as production tools, such as machines, buildings, cars, equipment and land which are not for sale or trade exchange. This also includes vessels, safes, and shelves, used to display goods, desks and furniture. All such fixed assets do not require any Zakat.

On the other hand, commercial assets which are for sale, known in financial accounting as circulating assets, are the properties that the merchant or the company intends to deal in; such as goods, equipment, cars and land bought for commercial transactions. All these properties are subject to Zakat payment as long as they are fulfilling the preconditions of Zakat.

Preconditions of Paying Zakat on Commercial Commodities:

The conditions of paying due Zakat on commercial commodities are the same as that of money. That is to say, one should be a free Muslim having full possession of a property which reaches Nisab and the passage of one lunar year. Besides, his possessions should have been bought to be used in commerce.

On the other hand, Maliki scholars asserted that such commodities should be bought with money. If otherwise, no due Zakat should be paid, until it is sold and the price was used to purchase other commodities. Moreover, if one bought a certain property with the intention to use it in commercial transaction, then he made up his mind to keep it for personal use; in this case there is no due Zakat on it. On the contrary, if a property was purchased with the intention to keep it for personal use, and afterwards he decided to sell it, there is no Zakat, until he sells it for money which he uses to buy commercial commodities.

How to pay due Zakat on commercial wealth:

When it is the due time to pay Zakat, the Muslim merchant (or the commercial company) should make a financial statement showing the goods still in stock and the total sum of money in possession, regardless of being used in commerce or not. To them, he should add his retained profits. From the aggregate, he subtracts his debts, which he has to pay from the money of his profits. Then he should pay Zakat on the remaining part at the rate of (2.5 %). This can be presented in the following equation:

The amount of Zakat = [the value of present goods + cash money (in his bank account or personal safe) + the postponed debt to be paid -the debt that should be paid from the present balance properties- ×2.5%]

The merchant is to estimate his commercial wealth according to the current prices which would be higher or lower than the price of purchase.

The prices used in such estimation should be either wholesale or retail prices as applicable. Otherwise, an average price for those who sell their commodities at both levels.    

Commercial Debts

All transactions, including selling and purchasing, could be done either in cash or on credit. So, how should the merchant calculate his commercial debts?

First:  The Merchant Credit Account:

1.    Due Paid Debt: this is the sort of credit where the indebted person either admits his ability to redeem his debts, or he denies it as long as it is documented. In other words, if it is referred to the court of justice, the merchant has enough evidences to recover his credit. This kind of debt is known as good debt. Thus, the merchant or the firm should pay Zakat on this credit balance every year. This is acceptable, except for the opinion of Imam Malik (May Allah have mercy upon him).

2.    A Credit Account That Would Never Be Recovered: this is the kind of credit which is denied by the indebted person and not documented. It is also the kind of credit obtained by someone who procrastinates it or is unable to pay it. This kind of credit is known as doubted credit. In this case, the merchant or the commercial firm is not required to pay Zakat on credit until it is recovered. Zakat should be paid only for one year as in conformity with the opinion of Imam Malik. Other scholars, on the other hand, see that Zakat is due every year on such kind of a credit.

Second: Indebted Merchants:

    If the merchant is able to pay his debts using the properties he has, such as buildings, farms, cars and the like which are over and above his needs, these debts then would not affect the due Zakat on his commercial wealth. On the other hand, if he has such properties, he should deduct his debts from his commercial profits. In this case, seeds, fruits and cattle will be excluded from paying Zakat. This is contrary to the opinion of Imam Ash-Shafi'i who sees that the debts do not affect the due sum of Zakat as long as the money is in one’s possession.

Due Zakat on Industrial Properties:

As for industrial properties, Zakat is due upon the profits and not on the capital, which often turns into fixed assets that require no Zakat, like machines, equipment and premises. These are counted as production infrastructure that does not require Zakat.

We should take into account that Zakat should be paid on raw materials used in the factory, if  one lunar year has passed on them, or have been added to the assets and cash money on which Zakat is due. This is regardless of whether these materials were kept unused, or used in manufacturing things which were not sold when the time of Zakat is due. However, if these materials were added to the rest of assets used in commerce, they should be treated on the basis and rules of business cited earlier. This is what Imam Malik (May Allah rest his soul) alone has agreed upon.

If the person was selling his commodities at current prices, he should pay Zakat every year. Monopolists who withhold their commodities waiting for higher prices, should pay Zakat for only one year upon selling their goods.