Do I pay zakat on my business?
Yes, on the business's zakatable assets. That means stock for sale, business cash and money customers owe you, minus short-term debts. Things the business uses to operate, like equipment, vehicles, furniture and premises, are not zakatable. Pay 2.5% of the result once a year, alongside your personal zakat.
What's zakatable
- Inventory: goods for sale, valued at what you could sell them for today (many use wholesale value).
- Cash: in the till and business bank accounts.
- Receivables: money customers owe you that you expect to collect.
- Raw materials that become part of the products you sell.
The Quran calls on believers to give from what they earn:
What's exempt
- Buildings, shops and offices you use.
- Machinery, tools, computers and vehicles.
- Furniture and fittings.
- Doubtful debts you're unlikely to collect (until you're paid).
The idea is the same as with personal items: things you use aren't taxed, the wealth that circulates is. See Do I pay zakat on my house and car?
The basic formula
Inventory + cash + collectible receivables − short-term liabilities (supplier bills, wages, tax due now) = zakatable business wealth. Add it to your personal zakatable wealth and pay 2.5% if the total is above the nisab. Example: €20,000 stock + €8,000 cash + €4,000 receivables − €7,000 bills due = €25,000, so zakat is €625.
If you own shares in a company with partners, you pay zakat on your share. Investors in listed companies follow slightly different rules; see Do I pay zakat on stocks?
Freelancers and sole traders
If you sell services (design, consulting, ride-sharing), you usually have no inventory. Your zakat is simply on the cash you've saved and on invoices you're sure will be paid. Set aside money for tax due and subtract it. See Can I count my taxes as zakat?
- Zakat is due on inventory, cash and receivables.
- Equipment, vehicles and premises are exempt.
- Subtract short-term business debts.
- Freelancers pay on saved cash and secure invoices.
People also ask
Do I pay zakat on money someone owes me?
If the borrower can and will repay, most scholars say yes, yearly or once you're repaid. Doubtful loans are treated differently.
Read the full answer →Do I have to pay zakat if I have debt?
It depends on the debt. Many scholars let you subtract debts due now, not a whole mortgage or student loan. Views differ.
Read the full answer →Do I pay zakat on rental property?
Not on the property's value. You pay zakat on the rent you've saved, along with your other cash. Property for resale is different.
Read the full answer →Do I pay zakat on gold jewelry I wear?
Scholars differ. The Hanafi school says yes; most others say no for jewelry worn normally. Gold kept as savings is zakatable.
Read the full answer →Do I pay zakat on my house and car?
No. There's no zakat on the home you live in, your car or other personal belongings. Property bought to resell is different.
Read the full answer →