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Zakat on goods purchased with the intention of resale

Answered according to Hanafi Fiqh by Qibla.com

Answered by Shaykh Muhammad ibn Adam al-Kawthari

I have a share in a property which will be built by 2006 after which I intend to sell straight away. At present I am still paying for the property in installments and the last payment will be in 2006. How/when do I pay zakat on this property and the money I have put aside for installments?

Answer:
In the Name of Allah, Most Gracious, Most Merciful

In the name of Allah, Most Compassionate, Most Merciful,

If you have actually purchased your share in the property, meaning the deal is complete and the instalments paid are part of the total sum towards the purchase of the property, then in such a case, Zakat will not be obligatory on this money paid as instalments towards the purchase of the property.

If, however, the deal is not yet complete, meaning that you have not actually purchased the share in the property, rather the instalments paid are merely something that is given in advance; then in such a case, Zakat will be obligatory on this money.

You can discover this by looking at the agreement on the official documents or by inquiring from the company.

As far as the land or property is concerned, you state that you are purchasing (or have purchased) it with the intention of investment and re-sale, hence the rulings of business wealth would apply here.

Goods that are purchased with the intention of re-sale are referred to as ‘merchandise’. If one purchased a piece of land, car, house or a property with the intention of reselling it, then Zakat becomes obligatory on its current market value. Therefore, if the piece of land or property has come into your ownership, then Zakat will be obligatory on the current market value of this land or property.

In other words, you will be paying Zakat either on the land or property (if the deal is complete) or on the instalments given (if the land or property has not as yet come into your ownership).

As far as the instalments that remain to be paid are concerned, it is obvious that there is Zakat on it, as this money is still with you and has not been paid.

And Allah knows best

Muhammad ibn Adam al-Kawthari
Darul Iftaa, Leicester, UK

 

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