Zakat Tax Law in Islam

Zakat in Islam and Zakat of Trades in Saudi Arabia as an Example

Contents

Section 1: Zakat in Islam 1

Introduction 1

Conditions that require Zakat 2

Purposes and Benefits of Zakat in Islam 4

1- Economic benefits 4

2- Social benefits 5

How to Spend Zakat 5

Funds that are Subject to Zakat (Taxable Money) 6

Zakat Rates 7

Section 2: Zakat of Trades in Saudi Arabia 8

Calculating Zakat 8

General Rules by (DZIT) 9

Conclusion 10

Appendix 11

References 13

Section 1: Zakat in Islam

Introduction

All Muslims whom meet certain conditions are subject to Zakat. However, Islam originally did not impose Zakat in set sums of money and neither did it establish the specifications for its use. Islam simply set the conditions and requirements, which determined whether someone’s funds are subject to Zakat or not. These conditions were designed to make people pay Zakat willingly. It also took into account the rights of those with scarce resources, as well as other people entitled to receive Zakat. Thus, the purposes of Zakat, whether at an individual or community levels, were achieved.

Zakat in Arabic means growth and increase, (Alqahtani), and in the Islam context it means “the giving of a fixed portion of one's wealth to charity, generally to the poor and needy”, (Salim). Islam has used this name to show that Zakat is not a way to decrease someone’s money but to increase it, through the blessing of Allah (God), and by encouraging people to invest rather than hoarding.

The status of Zakat in Islam is very important, it is the third pillar of Islam, “Narrated Ibn Umar: Allah’s Apostle said: Islam is based on (the following) five (principles): to testify that non has the right to be worshipped but Allah and Muhammad is Allah’s Apostle, to offer the (compulsory congregational) prayers dutifully and perfectly, to pay Zakat (i.e. obligatory charity), to perform Hajj (i.e. pilgrimage to Mecca), to observe fast during the month of Ramadan”, (Khan). Furthermore, Zakat...