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 and can be sent by email (see below) or alternatively via logging on to the "blog" at http://www.zakat.wordpress.com. This list is in no way comprehensive
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.
Traditionally money would be classified as gold and silver. In this instance
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).
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.).
There are two ways of looking at property on which there is a mortgage (and this is not condone them but simply to recognise thsy are all too common in these times). 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.
1) 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 personal possessions you could
sell to cover that debt, including the property itself.
2)The other position, which is the position we are adopting is that you don't actually own the house (the bank does) and you only owe
what payment is currently due at the time which will probably be a months’s payment
plus any arrears. The property is not seen as an item in your possession to
be taken against that debt but as above, other items could be used
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%. Goods are valued
at the market price unlike conventional accounting. Cash in hand and current
trading debts (for stock already received) could also be taken into account.
However, the value of assets needed to run the business such as delivery vehicle
and shop fittings is not Zakatable and not taken into account.
Zakat is paid on the value of turnover stock (selling price) and cash in hand on the day chosen for Zakat purposes.
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 will be unique and have to be looked as separately rather than being able to apply general formulas.
There is NO Zakat on personal property. The value is only considered against debts one owes to see if by selling these assets the debt could be repaid or reduced, and even in this case not all personal assets would be eligible.
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 maximum 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
= £42 the nisab would be the equivalent of £840
In arriving at the exchange rate the current value of dinars available within and outside the UK will be taken into accounts (eg. www.e-dinar.com) and also the value of other gold coins such as the kruggerrand , gold eagle and panda etc (see also www.kitco.com). The fact that VAT is payable on gold imported into the UK and also carriage (transportation costs) will also be a factor.
We are here only talking about the price used to establish the NISAB and thus amount of Dinars/Dirhams payable as Zakat and have taken the position of using the likely maximum cost of buying a Gold Dinar in the UK bearing these VAT and carriage in mind. This may mean using a price for example, 20% higher than the prices quoted from these sources.
In reality people may pay less to get hold of their Gold Dinars and recipients may get less when they redeem or sell them but this is an anomaly that will persist until Dinars become more commonly used for Zakat and other purposes.
LIVESTOCK & AGRICULTURAL PRODUCE
Although in the current Norwich situation we do not expect anyone to be eligible to pay Zakat on either livestock or agricultural produce it was still included on the original assessment form. It is worth noting that 2.5% or one fortieth does not enter into Zakat calculation of either of these two categories, although the one years ownership does apply to livestock (but not absolutely). In agricultural produce everything is calculated at the time of harvesting and it should be noted that NO Zakat is payable on fresh produce.
Traditionally livestock in particular has been easier to deal with than monetary wealth, as the collector turned up, made a physical count, identified the animals to be taken and that was that.
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, our position is that 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. In this instance this first year of assessment was aimed at being able to get the collection right for the same time the following year, although individually some people may feel the need to make arrangements before then. Zakat is also payable on the wealth of minors (children).
The “amirate” or Muslim authority has no need to keep a record of your monetary wealth
although certain statistics will no doubt be kept such as the number of people assessed
and the amount of Zakat (if any) collected and distributed. It would also be agood idea to list the categories of people receiving Zakat. If individual cases are of extreme interest in setting a precedent or the Zakat
cannot be calculated without further scrutiny by others, then this should 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 instructed to to find out if you fit the strict categories
for someone who might be a recipient of Zakat. This is an important part of
their duty.
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 or person in authority.
We suggest using the assessment form included on this site or a similar tool and also showing it to those people in authority at Mosques, Muslim charities and in local communities.
ZAKAT-AL-FITR
The Zakat which is the topic of the above is Zakat, the middle of the five Pillars of the Islam, 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. In our own case it is often left at the Mosque the evening before the eid, for distribution by the Amir before the eid prayer. In some madhabs it is permitted to give a monetary equivalent.