Is Zakah Mandatory on Cooperative Reserves or Profits?
Home > Ask the Scholar > Zakah and Charity > Is Zakah Mandatory on Cooperative Reserves or Profits?

Is Zakah Mandatory on Cooperative Reserves or Profits?

Questioner

Khalil

Reply Date

Aug 22, 2019

Question

As-Salamu alaykum. I got a question from a member about Zakah on our reserves - At Al-Barakah we have a statutory reserve where it is mandatory to transfer about a minimum of 10 % of the profits (when profits are made) on each accounting year. Is that Statutory Reserve or any other reserve such as profit equalization reserve Zakatable?

Mufti

Answer


Is Zakah Mandatory on Cooperative Reserves or Profits?

Wa `alaykum As-Salamu waRahmatullahi 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:

In case of dissolving the co-operations and after settling all its liabilities, these reserves are to be distributed to members, then they calculate the amount of Zakah on this share.


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

Let us first determine who owns in finality these reserves. If in case of dissolving the co-operations and after settling all its liabilities, these reserves are to be distributed to members, then you should inform members each year of the amount of these reserves per share, calculate the amount of Zakah on this share and tell them that they are required to pay Zakah on their own because it is a personal worship.

If the net amount in case of liquidation is not going for distribution to members but to charity or any other public use, there is no Zakah on them.

Corporations and institutions may have to pay Zakah sometimes but only as delegated by their members directly or by law.

Allah Almighty 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

find out more!