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Should I Pay Zakah on Inventories?

17 December, 2022
Q I have a convenience store. My inventory value $100.000, every week my inventory goes down to $50.000, mean sold out. Then I order new product for $50.000. Please, let me know if I have to pay zakah on inventory and on which amount.

Answer

Wa `alaykum as-Salamu wa rahmatullahi wa barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.


In this fatwa:

  • Zakah is the third pillar of Islam. It is due once a year on all the assets of the money that have lasted for a lunar year.
  • So, in your case, you don’t pay zakah on every inventory, rather you pay it once at the end of year after deducting all the expenses.

In his response to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:

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Zakah is an obligation and it is to be paid once every year. You have to pay it on your investment net worth according to a truly reflective balance sheet which you need to make every lunar year.

If you make a solar calendar balance sheet, then you will have to adjust the rate of zakah for the 11 days difference and use the rate of 2.5778% instead of 2.5%.

Most likely you need to adjust the regular balance sheet that you already make for accounting and tax purposes in order to reflect the true market value of all assets (including all fixed, mobile and cash assets not only inventory). And repeat the same once every year.

Almighty Allah knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.

About Prof. Dr. Monzer Kahf
Dr. Monzer Kahf is a professor and consultant/trainer on Islamic banking, finance, Zakah, Awqaf, Islamic Inheritance, Islamic estate planning, Islamic family law, and other aspects of Islamic economics, finance, Islamic transactions (Mu'amalat). Dr. Monzer Kahf is currently Professor of Islamic Finance & Economics at the Faculty of Economics and Management, Istanbul Sabahattin Zaim University, Turkey