Fatwa #263984 August 2013Kenya
How does one calculate Zakat on Inventory for sale?
Question
How does one calculate Zakat on Inventory for sale? does the inventory have to be in one's possession for one lunar year to enable one to pay zakat on it. For example; If i sell motor vehicles’, but if no motor vehicle that is for sale has stayed in my possession for more than 1 yr. do i still pay zakat
If the answer to the above question is affirmative then, what would happen in a scenario that some of the vehicles’ i have purchased for sale are not even shipped or are in high seas and will only be in my possession in a month, but i have already paid for them. Do I pay zakat on these vehicles?
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
If one purchases motor vehicles for resale, then those motor vehicles will be zakatable if they are in ones possession for one lunar year. If the vehicles are sold before the passing of one lunar year, then the zakat will be on the proceeds of the sale. The cash received will be added to the existing cash in one’s possession and the zakat will be paid at 2.5% on that amount if the cash amount is equivalent to or more than the nisaab amount and one does not have liabilities equivalent to or more than the nisaab amount.
And Allah Knows Best.
Mufti Ebrahim Desai