Since Ramadan 1424 (November 2003) the Amir and community in Norwich have consistently carried out the collection and distribution of Zakat in accordance with the Sunnah and Shariah using Gold Dinars. As one can expect we have to constantly tackle a variety of issues and make certain key decisions for that particular moment. We list some of them here. However, comments and alternative suggestions are welcomed (please log on) as we realise that this list is in no way comprehensive
Money/Cash & Savings
Traditionally money would be classified as gold and silver. Under current circumstances you should include cash in hand, money in the bank, other savings and any similar liquid assets. The principle we are adopting is to use a given formula to give an Islamic Gold Dinar (IGD) value to all monetary wealth (with of course allowances made for debts as described above).
Income & Salaries
There is no Zakat payable on salaries, wages, commission or other similar income (except possibly in the case of debt repayment over a period of time.).
If you owe someone money that amount is subtracted from your Zakatable monetary wealth. However, if you have personal assets you could sell to pay all or some of those debts then the value of those assets is first deducted from the debt itself, or cancels it out completely.
If you are owed money by someone then Zakat is paid on that debt as and when it is repaid. So in this instance 2.5% must be set aside from every payment received rather than apportioning the last 2.5% to be paid as Zakat. This is assuming the debt when first assessed reaches the level of the nisab.
Mortgages & Hire Purchase
There are two ways of looking at property on which there is a mortgage. However, before that it should be made clear that if you live in the house it is considered personal property on which there is no Zakat due. However, if you are in the business of buying and selling or renting houses then Zakat of 2.5% is due as soon as the property is sold.
The question we need to address is the debt itself. Either you own the house and thus owe the full balance of the mortgage. In this case your outstanding mortgage balance would be deducted from your Zakatable assets (call it debt relief), unless you have other excess personal possessions you could sell to cover that debt, which could include the property itself. However, the result of this would be that almost nobody with a mortgage would pay Zakat even though they are normally considered some of the most well off in society.
The other position, which is the position we are adopting, is that you only owe what payment is actually currently due at the time, which in most cases will be one month’s rent plus any arrears. The property is then not seen as an item in your possession that could be taken to offset any other debts you have.
Trading Goods & Investments
One type of trading goods is treated as an investment. For example this might be property (real estate), Persian carpets, certain vehicles and anything not subject to constant turnover. They are likely to be quite expensive items that you obviously don’t expect to sell everyday. The Zakat on these is paid ‘as and when’ sold at 2.5%
Turnover stock such as shop goods or things that are regularly sold are valued at the date of assessment and Zakat paid immediately at 2.5%. Unlike conventional accounting where goods are normally valued at cost price, for Zakat purposes goods are valued at the normal selling price.. Cash in hand and current trading debts (for stock already received) should also be taken into account before Zakat is paid. However, the value of assets needed to run the business such as delivery vehicles or shop fittings is not Zakatable and not taken into account.
Businesses & Commercial Enterprises
The conventional formula for valuing a business is Assets – Liabilities = Capital. In this instance Assets comprise Fixed Assets (property,vehicles, fixtures and fitting etc.) and Current Assets ( stock, short term debtors, cash in hand etc.). Similarly Liabilities include those in the Long term (such as long term loans) and Current Liabilities (trade creditors, overdrafts etc.) Therefore if valuing a business for Zakat purposes the Long Term Liabilities and Fixed Assets would be excluded. The other adjustment would be the basis for evaluation of stock if applicable. However, it is likely that each business would have to looked as separately rather than being able to apply a general formulas as most have a mix of circumstances.
There is no Zakat on personal property. The value is only considered against debts one owes to see if by selling excess items t the debt could be repaid or reduced.
The nisab of monetary wealth is 200 dirhams (ISD) or 20 dinars (IGD). In this case ISD means Islamic Silver Dirham and IGD means Islamic Gold Dinar, minted according to the specifications of the Islamic Mint. The current value of silver means that if the nisab of dirhams is taken you will be eligible for Zakat at a much earlier/lower value of wealth.
The decision has been taken to use the nisab of 20 Dinars (IGD) and therefore in this instance all Zakat on wealth is payable in Islamic Gold Dinars (equivalent amounts of other gold may be acceptable). The exact conversion rate for the IGD (to the £) will be given on your assessment sheet and will be based on the normal price it is likely to cost you to get a Dinar into your possession based on current prices and trends.
For example if the rate is 1 IGD = £30 then the nisab for paying Zakat on monetary wealth would be equivalent to £600 and if the rate is 1 IGD = £50 the nisab would be the equivalent of £1,000
Dinar/Dirham Exchange Rates
In arriving at the exchange rate the current value of dinars available in and outside the UK will be taken into accounts (eg. http://www.e-dinar.com) and also the value of other gold coins such as the kruggerrand , gold eagle and panda etc (see also http://www.kitco.com). The fact that VAT may be payable on gold imported into the UK and also carriage (transportation costs) will also be a factor.
Livestock & Agricultural Produce
This is a separate category and details can be found at http://zakatpages.com
The Amir and the appointed assessors in the case of monetary wealth (unlike livestock) have to rely on the diligence, honesty and integrity of each individual in ensuring they have been assessed correctly. However, the actual Zakat is still payable to the assessor/collector at the appointed time and in the right form. Therefore, if no Zakat is payable this should also be similarly communicated. Just like the other pillars there is a minimum amount of fiqh that everyone should know.
The “amirate” or collecting authority has no need to keep a record of your monetary wealth although certain statistics should be kept such as the number of people assessed and the amount of Zakat (if any) distributed.
If individual cases are of extreme interest in setting a precedent or the Zakat cannot be calculated without further scrutiny by others, then this will be done using reference numbers rather than names in order to keep each person’s financial affairs as private as possible.
The assessors will also be be looking out for identities of people who could be beneficiaries of Zakat
To refuse or decline to be assessed can be seen as tantamount to refusing to pay Zakat. So if anyone has a valid reason for not participating in the process then it should be brought directly to the attention of the Amir.
NB. Zakat is also payable on the wealth of minors
A Note on Zakat al-Fitr
The Zakat which is the topic of the above is the Zakat the middle of the five Pillars of the deen and is not to be confused with Zakat al-Fitr which is paid at the end of Ramadan. The amount payable per person is one sa’a which is approximately two litres. It is payable in kind (staple food of the area) and can be paid directly to deserving people or, in our own case, left at the Mosque the evening the eid is announced for distribution by the Amir before the eid prayer.