How to calculate Zakat on trade goods, taking into account debts and high-profit items
27-5-2024 | IslamWeb
Question:
I would like to know that if i need to pay zakat and have debts that i am planning to pay in the coming years if i can substract these. Also i would like to know the way or ways to calculate zakat on my trade goods. Some of these goods have very high margins like i buy for 2 euro and sell for 8 euro. (that is already after substracting shipping cost and vat). If i were to pay zakat on the 8 euro's it would seem like a lot to me especially since i have not sold these things and they could be in my inventory for years. This would basically be like me paying 10% zakah on my purchase price. for possibly years. I would like an detailed answer and if there is difference of opinion I would not mind hearing about it. I have seen a lot of different opinions on big fatwa websites regarding even if debts can be substracted (which seems logical to me) and a lot of differences on how to decide the value of trade goods (purchase price, selling price, and even selling price if you would sell all stock at once method and ).I am looking forward to your answer.
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, sallallaahu 'alayhi wa sallam, is His slave and Messenger.
There is a difference of opinion among scholars as to whether debts should be deducted from wealth subject to Zakah. Some scholars view that it should always be deducted, while others hold that it is never to be deducted. The opinion we choose and adhere to aligns with that of the Maliki school. According to this opinion, if you possess an asset exempt from Zakah (and is in surplus of your need) then you should allocate it against your debt, then the debt should not be deducted from the Zakah-liable wealth. Conversely, if no such asset exists to cover the debt, the amount owed should be deducted from the Zakah-liable wealth.
Concerning the valuation of goods, a merchant should calculate Zakah based on the selling price of the goods at the time Zakah is due. If the value fluctuates, the lowest valuation should be considered, as the principle is that he is clear of liability to pay more. If there is a variation in value between wholesale and retail, then Zakah should be calculated based on the method of sale.
Allah knows best.