An investor came to Leasing Fund Corporation and inquired how to calculate the zakat of his investment account. Note that the fund which the bank manages invests the wealth of the investors by purchasing assets and then leasing them for the benefit of the fund. In this case, how can the zakat be calculated? Will it be calculated based on the returns that are obtained from the leased assets or based on the total balance of the investor’s account?
Note that most investors deposit their money for a short period of time; that is, usually less than the investment period. This means that some investors request participation in the fund for a period of three months or six months or one year, while the leasing period is from three years to five years.
Zakat is compulsory on every Muslim when its conditions are fulfilled, based upon the statement of Allah, the Exalted, “Establish salah and pay zakat” and the hadiths of Angel Jibril and Ibn ‘Umar. In both of these primary sources, it was mentioned that zakat is one of the pillars of Islam. Also, in the hadith of Mu‘adh bin Jabal, the Prophet (peace be upon him) said, “If they obey you in that, inform them that Allah has made obligatory upon them a charity (zakat) that is to be taken from the wealth of their rich and given to their poor.”
The investment in the fund is confined to the purchase of assets to be leased, and the fund does not trade in these assets; it will not sell them and purchase others; and it does not intend to invest in them by leasing them for a short period and then selling them for more than their purchase price. Rather, the aim of the fund is to keep these assets and exploit their usufruct by way of leasing. If the matter is as mentioned, then zakat is not due to these assets.
However, zakat is due to the revenue generated by leasing them. There is a difference of opinion among scholars whether zakat is due at the time of obtaining the rental fee or after the completion of a year of entitlement to it. This [latter] is the view of the majority of scholars, and this is what we choose and give fatwa with. Therefore, one who became entitled to a return from the rental of these assets, regardless of whether he became entitled to it a year after his involvement in the leasing investment fund or less than that, he is obliged to pay zakat on that return one year after it comes into his possession.
The amount of zakat due is 2.5% of the gross return. However, his Excellency, the Chairman of the Council, Dr. Yusuf al-Qaradawi, holds that the amount of zakat due on this return, and others like it, is 10%. And if the fund undertakes payment of the zakat on the return, by the authorization of the fund investors making it their agent, the mixed properties invested in the fund will become one property [for the purpose of calculating the zakat], according to the view chosen by some scholars of some fiqh academies.
However, if the investor personally undertakes payment of the zakat of the return on his investment in the fund, if it is less than the nisab [the minimum amount of property on which zakat must be paid] and if he has other wealth in the form of cash or the value of merchandise intended for sale, he will combine them in order to complete the nisab. If he does not have other wealth, zakat is still due on this return, even if it is less than the nisab, because it was mixed with other people’s wealth which, in combination, total more than the nisab.
However, if the aim of the fund is to trade in these assets, regardless of whether they lease them before reselling them, then zakat is due on the assets and the returns from them. This is done by assessing their [market] value a year after [the initial investment] and paying zakat of 2.5% of the entire amount.
Al-Rawdah al-Nadiyyah fi al-Fatawa al-Shar‘iyyah, Faisal Islamic Bank of Bahrain.