Zakat Ch01

Zakat Measurement
Zakat and Tax

Structure in Kingdome
of Saudi Arabia
Normal Resident
Personality
-Owner of self owned
establishment
-Partner in partnership
Legal or Juridical
personality
-Corporations
-Limited liability
partnership
Residence Conditions
-should have a permanent
house in the Kingdome
with at least 30 days of
residence during tax year.
-To reside at least for 183
days in the Kingdome
(continuous or
separately) with or
without having a
permanent living house.
Residence conditions
-If it is established
according to Saudi's law
- or its central
management located in
Saudi Arabia
Saudi or
Income
Non Saudi
Income
Money Subject To Zakat

A. Property which includes:
1. Zakat Al mustaghallat such as: rent
2.
3.
B.
1.
2.
3.
4.
5.
revenues of fixed assets

Zakat of plants and fruits
Zakat of livestocks
Commercial wealth which includes:
Inventory
Receivables
Cash money
Short term investments
Trading securities
Money Subject To Zakat

C. Cash wealth which includes:
1. Cash money
2. Gold & silver
3. Gold bars
4. Jewelries for savings
5. Cash from wages and salaries
D. Mineral & sea wealth. And Al Rikaz
which includes:
1. Net value of what extracted from earth
2. Net value of what extracted from seas and
rivers
3. Treasures
1.Determination of zakat base

for commercial wealth
For commercial wealth there are two methods for
determining zakat base:

A. Working Capital Method:
Under this method zakat base is determined by deducting
current liabilities out of current assets.
B. Owners Equity Method:
Under this method zakat base is determined by finding out
the amount of owners equity by the end of zakat year
after adding net income, reserves and retained earnings
and deducting net losses (if any) and net fixed assets
. The following table shows an example for calculating zakat
base using working capital method:
Zakat Base for Commercial Wealth (Working Capital

Approach)
Current Assets:
Cash
xxx
Receivables
xxx
Notes Receivables
xxx
Trading securities
xxx
Inventory
xxx
Total Current Assets
xxx
Current
Liabilities:
Payables
xxx
Notes Payables
xxx
Due loans
xxx
Total Current
Liabilities:
Net Zakat Base
(xxx)
xxx
Exercise (1)
Use the following balances of XYZ commercial
company to calculate zakat base and zakat due

for title
the yearBalance
ended dec.31,
2014
Account
Account
title
Balance
Cash
Notes
payable
Lands
76,200
a/c payable
10,900
3,660
a/c
receivables
18,930
123,990
Short term
investments
24,870
Inventory
(finished
products)
24,400
Inventory
(raw
materials)
33,270
Trading
securities
34,250
Long term
investments
65,500
Loans (due
2018)
45,000
Bonds (due
2014)
14,620
Prepaid rent
12,000
Accumulated
15,000
Exercise (2)
Use the following balances of ABC commercial

company to calculate zakat base and zakat due
for
the year ended
dec.31,Account
2015
Account
Balance
Balance
title
Cash
title
79,400
a/c payable
10,900
3,660
Notes
receivables
24,280
buildings
217,960
Short term
investment
s
24,870
Inventory
(finished
products)
24,400
Inventory
(work in
process)
56,270
Held to
maturity
securities
53,250
Saving
accounts
(restricted
3 years)
65,500
Notes
payable
2.Determination of zakat base for

Cash wealth
As stated before; Cash wealth includes:

Cash money
Gold & silver
Golden & Silver bars
Jewelries for savings
Cash from wages and salaries
Zakat Conditions on cash wealth:

1. Zakat is due after completion on e launer year
2. Zakat rate on cash wealth is 2.5%
3. All due liabilities or debts on the zakat payer should
4.
5.
6.
7.
8.
9.
be deducted from his total cash wealth.

It is allowable to sum all kinds of cash wealth
together for purposes of calculating zakat
Doubtful debts: book value only when they
collected
Bad Debts: not subject to zakat until they
Due Revenues: same treatment of debts
Trusts(as mortgages): not subject to zakat
prepaid expenses: not subject to zakat
Zakat determination for Cash Wealth

Cash money in Riyal
xxx
Cash money in Dollar (market value)
xxx
Golden or Silver coins (market value)
xxx
Golden or silver bars (market value)
xxx
Trading securities (market value)
xxx
What exceeds personal use of

jewelries
xxx
Current account in banks
xxx
Saving accounts in banks
xxx
Gross Cash wealth
xxx
- Due debts on zakat payer
(xxx)
Zakat base
Zakat Nisab (market value of 85 Gr
of Gold
xxx
xxx
If zakat base > zakat nisab

Zakat Due= Zakat rate 2.5% X Zakat
XXX
Exercise (3)
The following data represents details of the cash wealth :
300 grams of Gold (market value when zakat due is 130
riyals/gram)
1000 grams of silver (market value when zakat due is 12
riyals/gram)
30,000 riyals cash
25,000 riyals in current account
6,000 dollars (exchange price is 3.75)
80,000 riyals trust with a friend
25,000 riyals a market value for a golden Chain for personal use
20,000 riyals debts due on wealthy people
35,000 riyals savings from his own salaries
** if you told that:
Due living expenditures during the year is 40,000 riyal
Debts due on him is 4,500 riyals
His wife has golden jewels of 500 grams with due debts of 4,000
riyals and having debts due on rich people of 15,000 riyals
His House estimation in fair value 300,000 riyals
Required:
Calculate zakat base and zakat due
Exercise (4)
The following data represents details of the cash wealth :
1500 grams of Gold (market value when zakat due is 110
riyals/gram)
700 grams of silver (market value when zakat due is 18 riyals/gram)
50,000 riyals cash
100,000 riyals in current account (15,000 restricted)
15,000 J. Dinar (exchange price is 5.35)
60,000 riyals a loan to his friend
68,000 riyals debts due on wealthy people
10,400 riyals bad debts
95,000 his share of income from a partnership company
** if you told that:
Due living expenditures during the year is 55,000 riyal
Debts due on him is 4,500 riyals
His wife is about to have a surgical operation which estimated to
pay 25,000
His annual house insurance is 5,000 riyals
Required:
Calculate zakat base and zakat due
3.Determination of zakat base for

Plants & Fruits
Plants is referred to crops such as wheat and rice and fruits
is the production of trees such as apple and orange

Calculating Zakat base for plants and fruits should
undertake the following procedures:
1. Estimation of total value (cash or in kind) of production at
the moment of harvest or collecting the fruits.
2. Calculating all production costs to be deducted from total
production value (on a condition that it will not exceeds
one third of total production value)
3. Zakat base= total production value total production costs
4. Nisab of Zakat is 5 Awsaq or equivalent to 653 kg of wheat
5. Zakat rate is 5% if crops and trees irrigated by paying
costs and 10% if irrigated without paying any costs
Zakat determination for plants & fruits (in

quantities)
Production value in Kilo
--Gramm
Zakat Nisab (5 Awsaq) or 653 --Kg
If production value > 5 Awsaq
Zakat rate 5% if land irrigated
with cost
Zakat rate 10% if land
irrigated without cost
Zakat due= production value ---x zakat rate
Zakat determination for plants & fruits (in Riyals)

Production value (in riyals)
---
Deduct: agricultural costs (on a condition

of not exceeding one third of production
value)
planting or seeding costs
(---)
governmental costs
(---)
other related costs
(---)
Net production value
---
Deduct: Due debts (if there are any)
(---)
Zakat Base
---
Zakat Nisab: equivalent of (5 Awsaq) or

653 Kg in Riyals
Zakat rate 5% if land irrigated with

cost
Exercise (5)
The following information represents the results of
cultivating wheat crop (machines irrigated land):

1. Wheat crop during the season was 6000 kg
2. Agricultural costs during the season was 1500
riyal
3. Debts due on the farmer were 6000 riyal
4. Living and family expenditures during the season
7000 riyal
5. Market value of one kg of wheat is 4 riyal
Required:
.. Calculate zakat due according to evaluating the
production in quantities and in cash
Exercise (6)
. A Muslim leased agricultural land for 70,000 riyals
for cultivating wheat with the following details

1. Wheat crop during the season was 5000 kg
2. Agricultural costs 6000 riyal
3. Due debts for the lessee on 8000 (collectable)
4. Due debts for the leaser 9000 (collectable) and
4000 (uncollectable). Due debts on him 12,000
riyals
5. Living expenditures of the leaser during the year
were 20,000 riyals
6. Land is irrigated at cost
7. Nisab for this year evaluated at 1959 riyals
Required: calculate zakat using quantity and cash
method

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Zakat Ch01

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Zakat Measurement

Zakat and Tax

Money Subject To Zakat

revenues of fixed assets

Money Subject To Zakat

1.Determination of zakat base

determining zakat base:

base using working capital method:

Zakat Base for Commercial Wealth (Working Capital

Total Current Assets

company to calculate zakat base and zakat due

Use the following balances of ABC commercial

2.Determination of zakat base for

As stated before; Cash wealth includes:

Zakat Conditions on cash wealth:

be deducted from his total cash wealth.

Zakat determination for Cash Wealth

Cash money in Dollar (market value)

Golden or Silver coins (market value)

Golden or silver bars (market value)

Trading securities (market value)

What exceeds personal use of

Current account in banks

Saving accounts in banks

Gross Cash wealth

- Due debts on zakat payer

If zakat base > zakat nisab

3.Determination of zakat base for

is the production of trees such as apple and orange

Zakat determination for plants & fruits (in

Zakat determination for plants & fruits (in Riyals)

Deduct: agricultural costs (on a condition

other related costs

Net production value

Deduct: Due debts (if there are any)

Zakat Nisab: equivalent of (5 Awsaq) or

Zakat rate 5% if land irrigated with

cultivating wheat crop (machines irrigated land):

for cultivating wheat with the following details

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