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Zakat on Retail Stores

❓ Question
As-salamu alaykum,
I would like a detailed explanation of how to calculate Zakat for retail store owners, given that money is in a state of continuous circulation. Should Zakat be calculated on the profit, the net profit, or the total capital?
Answer

Wa alaykum as-salam wa rahmatullahi wa barakatuh,

Zakat on retail or wholesale commercial stores — or any trade where capital is continuously circulating — is calculated as follows:

  1. Calculate the current value of goods at their selling price (wholesale or retail). Damaged goods, if they retain any value and can be sold, are valued at their current market price.
  2. Equipment such as furniture, office items, computers, and other work tools are not included. Only goods prepared for sale are counted.
  3. Include all liquid cash on hand, whether in a bank account or physically held.
  4. Include debts owed to you by customers or distributors that are expected to be recovered. Doubtful or unlikely-to-be-recovered debts are not included.
  5. Deduct any debts you owe, or the value of goods taken on consignment, from the total of the above items.

If the remaining total reaches the Nisab threshold, then one-quarter of one-tenth (2.5%) is due upon completion of a full lunar year (hawl).

Zakat is calculated on total capital — both goods and cash — not on profit alone.

And Allah knows best.

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