My question is about the ruling on the zakah of shares and how it is paid. Is there a difference between shares intended for buying and selling, and those held merely to preserve one's money?
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The questioner : A questioner says: O honorable Shaykh, my question is about the ruling on the zakah of shares and how it is paid. Is there a difference between shares intended for buying and selling, and those held merely to preserve one's money? If they yield a profit at a certain time, he might sell them, but not with the intention of buying and selling when he purchased them? What is the time for its hawl? And how do we pay zakah on its increase?
The Shaykh : Regarding shares in large companies, as far as I know, the government, may Allah guide it, collects the zakah. Whatever the government collects as zakah fulfills its place, and the obligation is discharged by it. As for small shares, the government does not collect them, and you must pay their zakah if you intend them for trade. You pay zakah on the principal and the increase. If you do not intend them for trade, like a person who places his money in land merely to preserve the money, but if he needs it, he sells some and spends it, then there is no zakah on these, because they were not trade goods. They were not trade goods, nor are they among the assets on which zakah is obligatory on the item itself. So he owes no zakah. As for how he pays it, we say: when the hawl is completed, he estimates their value at the time of the hawl and pays out one-quarter of a tenth. He should not consider what he paid for them, because he might buy them cheaply and their value increases, or buy them expensively and their value decreases. The criterion is their value at what time? At the time when the zakah becomes obligatory.
The Shaykh : Regarding shares in large companies, as far as I know, the government, may Allah guide it, collects the zakah. Whatever the government collects as zakah fulfills its place, and the obligation is discharged by it. As for small shares, the government does not collect them, and you must pay their zakah if you intend them for trade. You pay zakah on the principal and the increase. If you do not intend them for trade, like a person who places his money in land merely to preserve the money, but if he needs it, he sells some and spends it, then there is no zakah on these, because they were not trade goods. They were not trade goods, nor are they among the assets on which zakah is obligatory on the item itself. So he owes no zakah. As for how he pays it, we say: when the hawl is completed, he estimates their value at the time of the hawl and pays out one-quarter of a tenth. He should not consider what he paid for them, because he might buy them cheaply and their value increases, or buy them expensively and their value decreases. The criterion is their value at what time? At the time when the zakah becomes obligatory.