Paying Taxes or Penalties from Riba Interest or Pension Funds

3-12-2018 | IslamWeb

Question:

I leave in an non-islamic country. We have a rule here that we need to file in tax returns even if NIL annually. My wife has defaulted on this as she was not aware NIL return was to be submitted as well. Now this may attract penalties and interest thereof by the tax body. Can we pay such charges from interest received from bank account or interest from pension fund.

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Answer:

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

One must get rid of Riba (interest and/or usury) by giving it to the poor and the needy. The possessor of Riba is not allowed to benefit from it, spend on himself from it, or give it out of favoritism to those who do not deserve it. However, if the person who possesses this Riba is poor, then he may spend it on himself and on those whom he is obliged to provide for because in this case they fulfill the requirement of deserving it.

An-Nawawi said: "He is entitled to donate this money to himself (i.e., benefit from it himself) or (give it to) his children if he is poor, because if his children are poor, then they fit the description (that makes them eligible to benefit from it). Rather, they come in priority over others in donating it to them, and he may also take from it according to his needs because he is also poor." [End of quote]

As for the profits of the pension fund, then there are some details about it; if the money in the fund is invested in what is forbidden like Riba, then its ruling is the same as the ruling on Riba-based profits. However, if such profits resulted from a permissible investment or were donated by the government, then there is no harm in benefitting from them, and one may pay taxes or fines, and so forth, from this money.

For more benefit, please refer to Fataawa 8329, 83783, 83536, 92260, 98776 and 129690.

Allah knows best.