Zakat is the third pillar of Islam. It refers to all the money that giver of charity spends for its known disbursement channels. It is in Islamic Sharia (a share of money and the like that shall be given to the poor and the like on special conditions). Zakat was called by this name because it was prescribed to purify money. Also, paying zakat is a reason for the increase and growth of money, and a reason to increase and multiply the reward for the zakat giver in the hereafter. Zakat is called charity, except that charity includes obligatory and supererogatory duties, unlike zakat, which is an obligatory and duty act. Zakat is obligatory with regards to cattle, gold, and silver, different types of crops and fruits, tradable commodities, Rikaz, and metal. Zakat is obligatory and is not a charitable contribution. It is not considered a tax. Rather, it differs from it, and there is no difference in its amounts and provisions except in a few minor issues. The Zakat payer or his representative pays the Zakat to the beneficiaries. If the ruler requests it, it must also be paid. Zakat is only paid to its legal disbursement channels. Nonpayment of Zakat is the cause of money damage and loss and the punishment in the hereafter. The ruler is also obligated to take zakat from the one who does not pay it if he believes it is obligatory.
Rikaz Tax Consultants Company provides advice and solutions for zakat on trade commodities, which are calculated according to two mathematical equations approved by Sharia authorities, namely the working capital equation and the equity (net worth) equation.
The working capital equation is the direct equation for calculating Zakat on trade commodities. Its components are current assets, which include funds available in banks, inventory and raw materials, commercial debts, and securities held for sale, minus the currents liabilities that relate to this asset, which are composed of current liabilities that include debts payable to others, accruals, and short-term notes & securities. The difference is known as the zakat base. Zakat is calculated at a rate of 2.5% (a quarter of a tenth) of the zakat base. The equity equation is composed of shareholder’s equity (share capital, retained earnings, reserves, and current profits), and long-term obligations less fixed assets & investments. The resulting difference is the zakat base. Necessarily the application of either of the two equations should lead to the same zakat base.
Our professional services in the field of zakat include the following:
- Assisting zakat payers to calculate zakat on their wealth.
- Assisting zakat payers to pay their Zakat-to-Zakat Fund in UAE, who deliver the zakat to the recipient approved in the Shariah law.
- In cases of different commercial activities, we can help the zakat payers to consolidate the results of the activities and pay zakat on the unified Zakat base.
- Communicating with the Zakat Fund in the UAE and obtaining facilities and privileges for zakat payers who voluntarily pay their zakat to the fund.
- Conducting training courses for the financial departments of companies on how to calculate zakat on tradable commodities in line with Shariah law.
- Providing professional advice to the zakat payers on any inquiries related to zakat on funds, investments, and tradable commodities.