Zakat is one of the pillars (or fundamental concepts) of Islam which makes it a compulsory act upon able Muslims. In the Quran, the notion or command of Zakat is regularly paired with the commandment to establish the Prayer.
Scholars say that one of the wisdoms of this pairing between Zakat and Prayer is that it makes us realize that our life in this world has two main responsibilities, the first to God and the second to fellow human beings.
Zakat on property today has become more complex with the emergence of various types of property, both in physical form such as gold, and digital property such as Bitcoin. The obligation to buy and sell a property or investment instrument is usually coupled with the obligation to pay zakat on it. Naturally, one of the properties obliged to pay Zakat on would be the shares owned by investors, whether they be Short-term investors or Long-term investors.
This begs the question, how would Zakat be calculated for investors with the intention to purchase shares for holding and enjoying dividend payment, and investors with the intention to sell within a short term?
For the first group of investors, Zakat is calculated at 2.5% of the value of all shares plus dividend and current balance of Trust Account, deduct outstanding financing amount (which is obtained for the purpose of buying shares, if any) and transaction costs. If various shares are purchased on different dates, payment date for zakat is subject to completion of haul of the respective shares.
Example:
| Date of purchase of Shares X |
10 Jan 2020 |
| Haul |
Haul has been reached |
| Number of shares owned |
100,000 units |
| Value per unit share |
RM1.30 (price reference shall be subject to zakat authorities e.g.
at the end of haul or lowest price in the period of haul) |
| Dividend Received |
Dividend is RM 0.01 per share x 100,000 units of shares
= RM 1,000.00
|
| Current Balance of Trust Account |
RM 10,000 |
| Transaction Costs |
RM 300 |
Zakat on shares X payable:
= (RM1.30 x 100,000 units) + RM 1,000 + RM 10,000 – RM 300.00
= RM140,700 x 2.5%
= RM 3,517.50
For the second group of investors, Zakat is calculated at 2.5% of the disposal gain i.e., the sale value plus current balance of Trust Account minus transaction costs. This calculation shall not include borrowed shares.
Example:
| Date of purchase / sale of Shares Y |
10 Jan 2020 / 20 Jan 2020 |
| haul |
n.a. |
| Number of shares owned |
50,000 units |
| Purchase Value |
RM1.50 |
| Sale Value |
RM1.70
|
Zakat on shares Y payable:
= ([RM1.70 - RM1.50] x 50,000 units) + RM 10,000.00 – RM 150.000
= RM19,850 x 2.5%
= RM 496.25
Zakat is payable subject to meeting applicable nisab requirement of respective zakat authorities.
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