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Business Zakat

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Business Zakat Calculator

Explanation

Business Zakat

Business activity is one way of earning income so it can be taxed Business Zakat. In principle, it is not much different from Income Zakat, where it is imposed on traders and entrepreneurs. While income zakat is usually for those who work for a salary. However, the most significant difference between these two categories is how each one is counted. The way of calculation is different because it involves the company and the way the business operates. Let's find out more about this. 

What is Business Zakat?

Zakat business is zakat that must be paid based on the results or income from business activities. This business activity includes various fields and industries such as business based on manufacturing, services, buying and selling of goods, mining, agriculture, plantation, shipping, logistics, supply, distribution and so on.

Meanwhile, forms of business that are subject to zakat include private businesses, partnerships, and even partnership businesses with non-Muslim partners. All types of companies, cooperatives, stalls, online businesses, stock businesses, and any activity that involves the exchange of money for goods or services are considered businesses and must pay zakat if they meet the conditions that have been set.  

Advantages of Paying Business Zakat

The beauty of paying zakat, no matter what kind of zakat, is a practice that perfects our worship to Allah SWT, and also allows us to help our fellow human beings. It's like getting double the bonus felt as a result of fulfilling this responsibility. 

In particular, there are several advantages to the practice of paying business zakat including:-

  • Cleansing the business results from all the wrongly weighed or miscalculated elements that we may not be aware of while doing it 
  • Raise a sense of gratitude for the sustenance bestowed on our business
  • It is also an encouragement to strive even harder after examining the business results in a given year, hopefully to be able to contribute more to the community and society
  • Feeling satisfied for being able to help the asnaf group and help develop the community as a result of our donations and payments 
  • Increase piety to Allah SWT because you can see for yourself that spending wealth in the way of Allah will not harm property and business 
  • And there are many other advantages of paying zakat that we may not be aware of 

Frequently Asked Questions

There are several arguments that refer to the obligation to pay business zakat. Among them include the following.

The words of Allah SWT:

"(The worship is done by) people with strong faith who are not neglected by business or buying and selling rather than mentioning and remembering Allah, and establishing prayer and giving zakat; they fear the day (of judgment) on which hearts and views will be reversed." [Surah Al-Nur (24): 37]

This word clearly shows that believers will not neglect to pay part of the profits of business or buying and selling activities that become our sustenance.

Meanwhile, there is also a hadith of the Prophet that touches on this matter.

One of them, Samurah bin Jundub stated: "Indeed, the Messenger of Allah commanded us to issue alms (zakat) from what we prepared for business." (Hadith narrated by Abu Daud).

This hadith apparently refers to business zakat and business activities.

Anas RA narrated that Abu Bakr RA prescribed for him what the Messenger of Allah SAW prescribed:

"And if a shared property is mixed by two people, then both of them pay zakat fairly (according to their respective rates or shares)".[HR Bukhari]

The hadith above not only shows the obligation to pay zakat, but can be used as a reference for traders who have non-Muslim partners. As it turns out, the rate of business zakat paid depends on each individual's share, as well as each individual's ability.

The conditions that require payment for individuals are as follows:-

  1. Islam
  2. Independent
  3. Perfect belonging to the business
  4. Achieve nisab
  5. Reaching the haul – that is enough for a year
  6. The item is intended for business
  7. The business must comply with Islamic law

For businesses that are illegal from the Islamic point of view, such as selling alcohol, gambling, etc., it is not obligatory to pay zakat. 

Of course, the way to calculate business zakat is different from income zakat due to several factors such as employees and the cost of materials or goods. 

In general, the way to calculate the payment that needs to be made is as follows:

  1. Cash income (including at the bank) & capital + Inventory value + Credit value (such as business loans) – Expenses & business debts = Balance
  2. The balance from the above calculation, if it is sufficient for the nisab value (or exceeds it) is then multiplied by the rate of 2.5%. This amount is the amount to be paid. 

For general reference, the following terms are explained:-

Inventory: Stock of goods including raw materials and goods for sale 

Expenses: Including employee wages, office or sales site rent, electricity bills and so on. 

Nisab business zakat is set at a rate of 2.5% from the net profit per year, that is after the end of the haul period. This ratio is based on the value of 85 grams of gold, which is estimated to be equivalent to the value of RM21,432 at the last update, which is in July-December 2022. However, it should be taken into account that this value depends on the current gold rate. For information, the rate of nisab zakat based on the value of silver is subject to 595 grams of silver. 

Therefore, if the profit and value of your business assets reach or exceed this RM21,432, business zakat must be imposed on it after sufficient haul. Usually, most traders or company owners calculate the haul starting from January to December. This calculation is a convenient calculation to subtract the amount due from the income tax or business tax calculation for the year. 

However, it is recommended for zakat payers who follow the Christian calendar (ie January to December) to follow the count that has been set by Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI), where the ratio is calculated as 2.577%. This is because the number of days in a year according to the Christian calendar is more than a year according to the Hijri calendar. In earning a living, we need to carry out our responsibilities well so it is good if we are honest in calculating the rate and nisab of zakat, especially when paying business zakat. 

Business zakat can be paid with any zakat collector in your place of residence. It can also be paid online by filling out the form above. 

Happy fulfilling the obligation to pay business zakat. 

Calculate & Pay Zakat

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