In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 28 (3/4) Zakāh on Company Shares

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 4th session in Jeddah, Kingdom of Saudi Arabia, on 18–23 Jumādā al-Akhira 1408h (6–11 February 1988),

Having examined the research papers submitted to the Academy concerning

Zakāh on Company Shares,

Resolves

First: Zakāh on shares is an obligation upon their shareholders. The com- pany must pay zakāh on their behalf if any of the following conditions are met:

• If its statutes so stipulate,
• by resolution of the General Assembly,
• If the State’s law (the law of the land) requires companies to pay zakāh,
• Or if a shareholder himself authorizes the company’s governance to pay zakāh on his behalf.

Second: The company’s governance must pay zakāh on its shares in the same manner as person pays zakāh on his wealth. In other words, it shall pay zakāh on the assumption that the capital of all shareholders is the property of a single person, and calculate zakāh accordingly, taking into account the type and value of assets subject to zakāh, its percentage and any other consideration relevant the zakāh of a physical person according to the principle of mixed assets gener- ally accepted by some Fiqh scholars concerning all assets.

In calculating zakāh, the company shall take due account of shares not li- able to zakāh, such as shares owned by the Public Treasury, Waqf institutions, charitable organizations as well as non-Muslim shareholders, and make the necessary deductions.

Third: If the company, for any reason did not pay zakāh on its wealth it becomes obligatory on shareholders to pay zakāh on their respective shares. Therefore, if the shareholder is able to know, from the accounts of the com-

pany, the exact amount of zakāh due on his shares had the company paid the due zakāh; he should pay that amount, as this is the normal original way for determining the zakāh due amount.

If the shareholder has no way of knowing these pieces of information for the calculation of the amount due, then:

• If, however, the shareholder is unable to know that amount and his inten- tion of retaining the shares is to benefit from their annual return, not for the sake of trading them he should apply the rules of Zakāh on returns, in con- formity with the Academy resolution no. 2 (2/2) concerning Zakāh on Rented Real Estates and Non-Agricultural Leased Lands. The owner of such shares is not required to pay Zakāh on the assets of shares, but only on the dividends, which is at a rate of ¼ of 1/10 after the elapse of one year from the date of the actual reception of the dividends, provided that all other conditions are met and no impediment 9
• If, on the other hand, the shareholder has invested in shares for business purposes, then his shares are subject to Zakāh as commercial If they are still in his possession after the elapse of one year period, he shall pay Zakāh on their market value; however, if there is no stock market, he will pay Zakāh on their value as appraised by qualified experts. He will pay ¼ of 1/10 (2.5%) of their market value plus their dividends, if they yield any dividend.

Fourth: If the shareholder sells his shares during the year, he will add their price to his wealth and should pay Zakāh on the total of his wealth at the end of the year. The buyer, on the other hand, shall pay Zakāh as mentioned above.

Indeed, Allāh is All-Knowing.