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Business and Zakaat

Answered as per Hanafi Fiqh by CouncilofUlama.co.za

Q: There is a family business which is running at a big loss. The partners are as follows:
Mother (partner on paper only), elder son, younger son.

The eldest son is the main one running the business and due to some business transactions, he has made big losses. He accepts the full responsibility for the losses and has accepted that all the debt is on his head and not on his mother or younger brother. He is unable to generate business income now to pay off the creditors. He has been trying for almost a year but to no avail.

The debt is standing at about $450,000.00.

The business assets are as follows:
A piece of land bought for selling purposes-present market value at $75,000

Besides this piece of land which we are clear about that it is counted as a zakat asset the other assets are:
1.       3 trucks for everyday use in business – valued at about $25,000
2.       3 family cars for everyday personal as well as business use – valued at $17,500
3.       2 machines used in the business for producing goods – valued at $12,500
4.       House belonging to the mother for living in. (valued at $200,000)

As far as we know that items 1-4 are not zakat assets. Please confirm on this because people are claiming that the elder brother is not eligible for zakat because of them.

Our question is that taking all the above into consideration is the elder brother eligible for collecting zakat in  order to pay off his creditors because as mentioned above he has been trying for almost a year but without any success and now he is getting death threats from one of the creditors whilst another is in the process of taking court action against him.

A: 1) The mother because she is not an actual partner in the business will not feature anywhere, she is totally excluded from the entire equation.

2) The debt will not only be the responsibility of the elder brother, it will be a liability of both partners, as both were virtual, actual partners in the business even though the elder is prepared to take responsibility for all the credit, hence when calculating the eligibility of the elder brother for zakaat  only that ratio of the debt in relation to his shareholding in the business not the entire debt will be apportioned to him.

3) Yes because the land was bought for the purpose of reselling it will be considered a zakaatable asset, hence it has to be deducted from  the brothers liabilities when considering their eligibility for zakaat, in fact it needs to be sold off to assist in dimishing the debt.

4) All 4 items listed are part of the families daily nesseccities hence it will not be factored in when considering eligibility for zakaat

5) From the facts and figures you have provided it is apparent the the elder brother will be eligible to receive zakaat to assist in paying off his debt.

And Allah Knows Best

Aadiel Moosagie (Mufti)
Council of Ulama Eastern Cape
Tel/Whatsapp: +27 83 982 6968
[email protected]

This answer was collected from CouncilofUlama.co.za, which is operated under the supervision of Council of Ulama Eastern Cape, South Africa.

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