What is the zakah due on shares if we know that the value of the shares doubled, for example, after purchase? Is the zakah obligatory on the original value?
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The questioner : He says:The questioner : What is the zakah due on shares if we know that the value of the shares doubled, for example, after purchase? Is the zakah obligatory on the original value or on the value after the increase? And if we know that some share companies announce in the newspapers that they pay out the zakah, what is the obligatory zakah in this case?
The Shaykh : Yes, in reality, the person who saves in shares falls into one of two categories. Some people take shares for investment, and some people take shares for trade. The difference between the two becomes clear with an example. If you buy shares that you intend to keep and invest in their profits, this is for investment, and there is no zakah on the principal; rather, the zakah is on the profit obtained from them. As for trade, it is when a person buys shares expecting the share price to rise so he can sell them, like a merchant of goods who sells whenever the shares increase and buys whenever they decrease. In this case, he must expedite the zakah on the shares, appraise them every year, and pay their zakah, even if he is in profit. If he bought the share for one hundred and it increased to two hundred, he must pay zakah on the two hundred. Let a person look at himself: is he an investor or not? If he is an investor, he owes no zakah except on the cash profit. If he is not an investor but a trader, he owes zakah on the entire share.
The questioner : ...
The Shaykh : There is no harm if he is a trader who bought for two hundred and sold for five hundred. Yes.
The questioner : May Allah reward you.
The Shaykh : Yes, in reality, the person who saves in shares falls into one of two categories. Some people take shares for investment, and some people take shares for trade. The difference between the two becomes clear with an example. If you buy shares that you intend to keep and invest in their profits, this is for investment, and there is no zakah on the principal; rather, the zakah is on the profit obtained from them. As for trade, it is when a person buys shares expecting the share price to rise so he can sell them, like a merchant of goods who sells whenever the shares increase and buys whenever they decrease. In this case, he must expedite the zakah on the shares, appraise them every year, and pay their zakah, even if he is in profit. If he bought the share for one hundred and it increased to two hundred, he must pay zakah on the two hundred. Let a person look at himself: is he an investor or not? If he is an investor, he owes no zakah except on the cash profit. If he is not an investor but a trader, he owes zakah on the entire share.
The questioner : ...
The Shaykh : There is no harm if he is a trader who bought for two hundred and sold for five hundred. Yes.
The questioner : May Allah reward you.