What is the ruling on the zakah of trade goods?

The questioner : Generally, if there is capital invested in trade or in a business, and this turns into merchandise or into something that yields profit from that in every year, or, now, in another type of investment, for example.

The Shaykh : Pardon me, before proceeding with the question: the profit that comes out of it—if it is added to the wealth he already has and reaches the nisab, that is one thing. But we also say in another matter, which is that this merchandise, whose origin was currency and then turned into trade goods, has zakah due from its substance. I think you know this.

The questioner : No, and I deal with it in this way. And to be precise, Allah knows best about you and about Abu Malik, but I remember the recording I wrote in my notebook, whether I took it directly from you or from Abu Malik.

The Shaykh : It does not matter.

The questioner : But the most accurate is that I took it from him, that you told me: the money resulting from the profit of this trade is added to your wealth, and if it reaches the nisab, you pay its zakah. As for the merchandise, the money that turned into merchandise and became merchandise, you told me: I should give charity from it, and it is not necessarily two and a half percent, but...

The Shaykh : This contradicts what I said earlier.

The questioner : Because just now I said: from its substance, and its zakah.

The Shaykh : Yes, what is the difference between charity and zakah? We mean obligatory charity, my brother.

The questioner : No, that is fine. If you mean zakah by charity, no, here it means:

The Shaykh : We mean zakah. If you wish, say: zakah. If you wish, say: charity. We mean obligatory charity, which is not fixed or limited, but rather by what your soul is generous with.

The questioner : So here it means there is a distinction, because I did not think that what I gave as charity from this merchandise...

The Shaykh : This is obligatory.

The questioner : I did not give it as charity from this merchandise, meaning its valuation is left to other channels other than the channels of zakah. That is, if you consider it charity, this is a portion I can give in charity to mosques, whereas zakah means you do not pay zakah for building a mosque.

The Shaykh : It is clear that charity, if the obligatory kind is intended, its channels are known. And charity, if the non-obligatory kind is intended, it is as you say. And when I state that trade goods do not have a fixed zakah as they say, that the merchant must appraise his trade at the end of every year, if it reaches one hundred thousand, for example, then two and a half percent is due on every hundred, as if it were currency, we do not attribute this to Allah. This appraisal...

The questioner : No?

The Shaykh : We do not attribute this to Allah, nor do we draw near to Allah with it. But we say: every merchant is obligated to purify this wealth with what his soul is generous with, implementing the general texts. But the profits that resulted from this trade and were added to the capital, this has its ruling:

The questioner : What Allah willed.

The questioner : Now, my sir, to complete your question.

The Shaykh : Please go ahead.

The questioner : Now, I am in trade with some people, although I am the one responsible for this project.

The Shaykh : This is another matter. Just stay here for now.

The questioner : They do not want... they say my money gives me profits, give them to me, and also my merchandise, my merchandise that I bring out in the way I want, I am free, and so on.

The Shaykh : No.

The questioner : I mean, what I do is that I look at what my share of this merchandise is and deal with it that way. Is this permissible?

The Shaykh : Yes.

The questioner : May Allah reward you with good.

The Shaykh : Yes, we were discussing with Abu Muhammad the case of partners in wealth where zakah is due. This wealth reached the nisab, but as for the partners, each one’s share of this wealth does not reach the nisab. So is zakah obligatory on this group of wealth? That is, four people are partners in forty head of sheep, and they have a known zakah. If each one takes his share, it comes out to ten, and zakah is not due on it. So this group of four partners has zakah due on it. Now, in this case, this is different from your case.

The questioner : The answer is...?

The Shaykh : Yes, exactly.

The questioner : Before you separate?

The Shaykh : Yes, and we mentioned it in a hadith that the Messenger (peace and blessings be upon him) said: .

The questioner : ... the legal personality. Now, the hadith is before... a legal entity. This is what you call...

The Shaykh : In any case, these are terms, but we present the Shari'ah. So as for what you are doing, you have trade goods and you have partners in them. This profit that you added to your capital has no relation to the community, it has no relation. It does not pertain to your merchandise which is for trade, so the zakah in it is not fixed as we mentioned. So whatever you give from it, you have purified this merchandise.

The questioner : My share of the merchandise.

The Shaykh : Your merchandise is your share.

The questioner : I mean my share?

The Shaykh : Yes, of course.

The questioner : ... his merchandise is not known.

The Shaykh : Yes, of course.

The questioner : ... ؟

The Shaykh : Yes, exactly.

The questioner : May Allah reward you with good.

The questioner : ... that his merchandise is not...

The Shaykh : But he has a specific share. That is it.

The questioner : I have, for example, five.

The Shaykh : Yes, that is correct.

The questioner : Everything is known in this.

The questioner : Of course, the important thing is that my merchandise is like it in value, like it in substance.

The Shaykh : What is it?

The Shaykh : By value, just as it is by substance.

The Shaykh : If it is not possible by substance, it is converted to value. The original is the substance.

The questioner : I mean he sells metal materials and so on.

The Shaykh : I give you a very sensitive example. A car dealer has hundreds of cars. He must give out at least one car, right? He must give out a car. But to whom does he give this car? He needs to find a poor person in need of this charity. I go back and tell you: this is charity .

The questioner : ... .

The Shaykh : This is it. But he may not find this agent for this type of car, the poor person who is suitable to be given this car. He may know its value for certain, so he gives charity with its value to a group of poor people.

The questioner : The one who has two thousand Mercedes or one thousand Mercedes, a Mercedes comes out to him, and the poor person becomes rich.

The Shaykh : Hehe.

The questioner : I mean he ruins a poor person, hehe.

The Shaykh : There is no harm, Abu Yahya, in a poor person becoming rich overnight.

The questioner : No, my sir. The intention now is that the value of the car is distributed among more than one poor person. You allocate it to one person who moves from a state of poverty to wealth, and you forget the others.

The questioner : The source of this ruling, and the source of what pertains to the fact that the amount is unknown, and consequently how can we diminish the amount? I mean, why are we saying...

The Shaykh : .

The questioner : Yes, but zakah is known, two and a half percent. Are we talking about charity for trade goods in terms of one percent or five percent? And why is it unknown? I mean, where do we get this ruling from, and why, and where do we get from that it is unknown so that we know?

The Shaykh : , there is a verse in the Qur'an where if a person dies and leaves behind wealth and the division is done for the heirs, it should be given from this wealth to the poor. How much is given?

The questioner : If the relatives are present at the division.

The Shaykh : Yes, that is it. How much is given? There is no specification. Therefore, I say: the rulings of the Shari'ah are divided into two categories: fixed rulings, and absolute rulings that are not fixed.
The Shaykh: And the wisdom of that is . Look, for example, the obligatory zakah: zakah of the two currencies, zakah of animals, zakah of fruits and grains, and so on. These are not treated in the same way by the Shari'ah in terms of their payment. So as for the two currencies, the ruler has no right to intervene in the wealth of the rich and conduct a census of the rich man's wealth and take two and a half percent from the group of wealth. Rather, the Wise Lawgiver entrusted the matter of paying this zakah to the soul of the one obligated.
The Shaykh: He may not pay the zakah at all. He may not pay what is obligatory on him out of stinginess and miserliness. He may pay more than what Allah has prescribed, and this is rare. As for the zakah of livestock, there is a specific employee who goes around the livestock, sees them with his own eyes, appraises them, and takes their zakah despite the owner's objection. Likewise, fruits and grains have a specific collector who collects them.
This variation in the method of paying zakah is part of Allah’s (Mighty and Majestic) trial of His servants. Some of them are left to handle it themselves, as we mentioned regarding the two types of currency, while others have it taken from them whether they wish it or not. Therefore, it is not strange that there is a type of obligatory charity that is general and not fixed in amount. I recently gave you the example of giving to the poor who were present at the distribution. Is that clear?

The questioner : It is clear. Actually, I have a question from one of the brothers, but the question regarding zakah has not been asked yet. Please complete it.

The Shaykh: Go ahead.

The questioner : The question that came up is that you said: if the profit is added to the capital and it reaches the nisab, then it is paid out. In reality, in most commercial matters, the capital is placed entirely or mostly in goods, etc., so it does not remain as cash capital. Do we mean that the value of the profit is added to the value of its share of the goods, or to the money he has?

The Shaykh : To the money he has.

The questioner : To the money he has. But what went into the goods is the goods, and that is the end of it.

The questioner : As a reserve, likewise...?

The questioner : It is not there. If it is money, then it is money.

The questioner : No problem. A question from Mahriz: fifty thousand... now let’s say the profit is one hundred dinars. The companies now, or the partners... the profit, but they do not distribute this amount. They leave a part of it as a reserve in the company as funds, not as goods, on the basis that when an opportunity arises, they can buy something with these funds, or that the goods suffered a loss, so it is a cash reserve. My understanding, and this is what I practice, is that these reserves are like the goods, as long as they have not been distributed and they exist either for a later purchase or to support a potential loss as a precaution. Therefore, it is not considered distributed, and the nisab is not met despite its existence as liquid or cash funds in the company.

The Shaykh : I do not see that.

The questioner : This is profit.

The Shaykh : I do not see that. The important point in the matter is that if these partners know that a portion of this money is stored, as you mentioned earlier, and a lunar year has passed over it, they must pay zakah on their share of it. Because it is money, if you please, because it is money and not goods. Some of it has not been converted into goods.

The questioner : My sir, but here there is a detail:

The Shaykh : How?

The questioner : Here there is another detail.

The Shaykh : Please go ahead.

The questioner : That at any moment of the year, there are always funds in this company. I mean, not all the trading goods or project funds are in goods. They are always... you receive and keep amounts so that you can buy. So throughout the year, there is always cash:

The Shaykh : There is nothing new.

The questioner : But you, on the thirty-first, twelve, fifty, ninety of every year, in the Gregorian year in which we time the accounting of accounts for the purpose of understanding the financial situation, but before that, or a month before, or half a month before, etc., there is always money for the matters we are discussing.

The Shaykh : I do not see a new clarification in this statement that contradicts what we said earlier, that the partner who has shares, if he knows that there is money stored in the company’s box that has not been converted into goods and a lunar year has passed over it, he must pay zakah. What you mention does not contradict what I mentioned.

The questioner : It does not contradict, but to the extent that it is absolutely impossible to determine that a lunar year has passed over this money.

The Shaykh : Why?

The questioner : Because this money, why did I say that in the company it comes and goes? I mean, on some days there is no money at all, and on other days there is a lot. So the idea that the lunar year is always present has never been realized.

The Shaykh : But it seems like there is something, and of course I am not an expert on the reality of these companies, but I logically exclude that. I exclude that the company’s box would be empty of a nisab, meaning it would be zero. I strongly exclude this:

The questioner : The issue of the lunar year.

The Shaykh : No, before anything else, before we move to the lunar year.

The questioner : No, my sir, exclude it.

The Shaykh : Why?

The questioner : Because most companies, ninety-nine percent of them, are in debt and take from banks. So we are talking, actually, the company we want to talk about, if Allah wills, is a company that does not take from banks. But actually now, more than eighty percent, even of a company, there is not even... but the company we are talking about... your statement is correct, exclude that.

The Shaykh : Okay, I care about the reality we are talking about now. What is its obligation?

The questioner : So we are talking about a company where there is a nisab for the company, not for the individuals, meaning we also do not divide it.

The Shaykh : Yes, that is it. And that is why I said: I exclude that. So there will remain a nisab. I mean, if we suppose there was a million, and only a thousand remained, the fixed nisab and the obligation remain, unless the nisab decreases, in which case it is not obligatory.

The questioner : My Shaykh, regarding the issue of the nisab, we mentioned long ago that merchants who have more than one company, more than one source, and more than one shop, they determine a day in the year

The Shaykh : Yes.

The questioner : They gather what they have in these shops, all of them, regardless of whether this specific one has had a lunar year pass over it and this one has had a lunar year pass over it. I mean, this is impossible. It has become a tally of the specific amount for which a lunar year has passed and for which a lunar year has not passed, because the funds are numerous, more.

The Shaykh : This is another matter, may Allah reward you. This is another matter, and its answer is also known. I mean, the scholars differed regarding a person, let us leave the companies and merchants aside. A person, in the first month of Muharram, the nisab gathers for him.

The questioner : Brothers in faith, the continuation of the discussion is in the next tape.

The Shaykh : A person, in the first month of Muharram, the nisab gathers for him. In the second month of Muharram, zakah becomes obligatory on him. During the time between the first Muharram and the second Muharram, nisabs came to him, and he added these nisabs to the first nisab. At the end of the year, meaning in Ramadan, in the second Muharram, does he pay out on the nisab for which a lunar year has passed, regardless of the nisabs for which, if he wanted to determine their lunar years, he might have dozens of nisabs throughout the year? Does he pay out on the total of this money that has accumulated for him, or does each nisab have its own lunar year? There are two opinions among the scholars.