Guidelines

Zakat on Properties Properties may be taken for residential use, investment, or trade. Each case has its own ruling: If the property is used for residential or work purposes as to establish offices or stores, and the like: Zakat shall not be due. If the properties are used for investment as to be rented and to benefit from its earnings: Zakat shall not be due. Zakat is due on rent only if it reaches quorum on its own or by adding it to other money and one full year passes so cash zakat shall be due. Thus, zakat payer shall pay a quarter of a tenth of it. If the properties are for trade, as zakat payer buys and sells them with the intent of gaining profit, trade offers zakat shall be due. Zakat payer estimates it on the day when zakat is due and shall pay a quarter of a tenth of its value, 3.8.1 Zakat on Real Estate Contributions The intention of a person who enters into a real estate contribution differs: If he wants it for residential purpose, zakat shall not be due. If he wants to rent it and benefit from its revenue, zakat shall not be due on the contribution, but it shall be due on the revenue if it reaches quorum on its own or by other means and a full year passes. If he wants to gain profit by entering into the real estate contribution, he shall pay trade offers zakat on his full share with the profits. The land and the executed works are estimated at the end of each year, and he shall pay zakat on his share of it accordingly, by paying a quarter of a tenth of its value. 3.9 Zakat on Investment Funds Investment fund is: A joint investment program aims to provide an opportunity for investors to participate collectively in the profits of the program [of Investment Funds Regulations in the Capital Market Authority]. Funds may be used for investment (holding them and benefiting from their earnings), or for speculation (flipping them in the market for profit). If they are intended for investment, zakat shall be due as per their assets, considering the zakatable money they contain, such as cash, trade offers, livestock, etc. as they are zakatable. If the fund is intended for trade and speculation: Zakat shall be due with their profits like trade offers zakat. They shall be estimated on the day when zakat is due at the market price, then the zakat payer shall pay a quarter of a tenth of their value. If one owns one hundred investment units, value of each unit on the day when zakat is due is twenty riyals, total value of the units shall be two thousand riyals (SAR 2000). Zakat payer shall pay quarter of a tenth of them, which is fifty riyals. The investor can also calculate the zakat on his investment - if the fund announces the zakat on the fund - according to the following equation: Fund Zakat base × the unit owner’s ownership percentage in the fund × 2.5% 4.Payment of Zakat The basic principle is that the zakat payer pays the zakat on his wealth himself, as it is a great act of worship. Thus, he should do it by himself, and he should also make sure that it reaches its beneficiaries. He shall have the intention when paying it, as Prophet Muhammad said (The deeds are considered by the intentions) (agreed upon), so intention is a condition for paying zakat. Thus, it is not valid to be paid by anyone without zakat payer’s permission.