Fatwa's Insights - Worship

THE 57TH MEETING OF THE PERLIS STATE FATWA COMMITTEE / 2022

7 APRIL 2022 / 5 RAMADHAN 1443H

THE ASSESSMENT RATE OF ZAKAT ON PROPERTY

1. Property is defined as immovable assets comprising land, including whatever is situated thereupon such as buildings.

2. Fundamentally, zakat is not imposed upon property in the following circumstances: 

a. It is owned for preservation or habitation (al-qinyah/ القنية). 

b. It is owned for preservation or habitation (al-qinyah/ القنية), however, should a suitable profit opportunity arise or due to certain factors, the owner will sell it.

c. It is utilized for public benefit such as road usage or endowment.

3. If real property asset is owned to generate income such as rental and agriculture, then it is subject to zakat al-mustaghallat (المستغلات) and agricultural zakat.

4. Real property assets are subject to zakat if they are owned for commercial purposes as trade goods. The haul of such zakat commences from the time of acquisition of the property intended for commercial purposes. The zakat rate on property business is 2.5% upon attaining the nisab and completion of haul.

5. Generally, there exists a distinction in the zakat assessment formula for developers who possess formal companies registered as Sdn. Bhd. or Berhad, as opposed to small-scale developers and individual proprietors who do not possess formal companies (al-mutarabbis/المتربص).

6. The zakat assessment formula for formal companies registered as Sdn. Bhd. or Berhad (comprising property broker companies, developer companies & contractor companies) is as follows:

A. Current Assets (assessment year) subject to property trading zakat

1. Real‑estate inventories held for sale (Inventories held for sale)

i. Completed buildings (including land cost)

ii. Completed houses (including land cost)

iii. Land lots for sale

2. Trade debtors (after deducting doubtful debts)

3. Short‑term investment securities

4. Fixed deposits / investment accounts in banks

5. Company cash in banks and on hand

Total current assets subject to zakat = RM

B. Current Liabilities (assessment year) permitted (Operating Liabilities)

1. Current trade creditors

i. Provisions

ii. Liabilities arising under contracts (Contract liabilities)

iii. Current borrowings/financing

iv. Current lease liabilities (Lease liabilities)

v. Current tax payable

2. Non‑Shariah‑compliant income / returns such as bank interest

Total permissible current liabilities = RM

C. Value subject to zakat (A - B) = RM

D. Zakat Rate: 2.5%

E. % Muslim Ownership

F. Total Zakat = RM

7. Assets used for business operations such as company buildings, company vehicles, equipment, and others, are not included among the company assets liable to zakat.

8. The zakat assessment formula for small developers who do not possess formal companies (al-Mutarabbis/المتربص) is as follows:

A. Current Liabilities (assessment year) permitted

Property sales proceeds (Reaching nisab)

Total proceeds from sales = RM

B. Current Liabilities (assessment year) permitted

Business expenses:

i. Costs of selling real estate

ii. Rental cost

iii. Employee cost

iv. Legal cost

v. Licence cost

vi. Annual tax

vii. Others

Total business operating expenses = RM

C. Value subject to zakat (A - B) = RM

D. Zakat Rate: 2.5%

E. % Muslim Ownership

Approval of the Members of the Perlis State Fatwa Committee:

1. S.S Prof Madya Dato' Arif Perkasa Dr Mohd Asri Bin Zainul Abidin – Mufti of the State of Perlis

2. Sahibul Fadhilah Ustaz Tajul Urus bin Abdul Halim – Deputy Mufti of Perlis

3. Sahibul Fadhilah Profesor Dr. Basri bin Ibrahim

4. Sahibul Fadhilah Prof Madya Dr. Muhamad Rozaimi bin Ramle

5. Sahibul Fadhilah Dr. Hj Zaharuddin Bin Hj Abdul Rahman

6. Sahibul Fadhilah Prof. Madya Dr. Azman Bin Mohd Noor

7. Sahibul Fadhilah Prof Madya Dr. Mohd Akram Bin Dato' Dahaman @ Dahlan

8. Sahibul Fadhilah Dr. Ahmad Sufian Bin Che Abdullah

9. Sahibul Fadhilah Prof Madya Dr Ahmad Wifaq Bin Mokhtar

10. Sahibul Fadhilah Ustaz Syed Abu Bakar Bin Syed Kamal Bharin

11. Sahibul Fadhilah Dr. Muhammad Lukman Bin Mat Sin

12. Ustaz Muhammad Khidhir Bin Abdul Ghani – Secretary

Endorsed at the Meeting of the Perlis Islamic Religious Council and Malay Customs (Majlis Agama Islam dan Adat Istiadat Melayu Perlis) Bil. 3/2022 on 2 June 2022.