"Ask the people of The Remembrance if you don't know".
[The Qur'an, 16:43]
Does a year need to pass on my trade stock before I pay zakah on it? If the value of an item decreases after purchasing it for trade do I still need to pay zakah on it?
“There is no zakah on items unless they are for trade and the value of them reaches the threshold (nisab) of either gold or silver and the value of them is added to gold and silver… There is no stipulated threshold for items because the shari’ah never transmitted one so it resorts to the value and if they are valued with either gold or silver then consideration is with the value and they are added to gold and silver.”
(Al-Ikhtiyar, Chapter of Zakah of Gold and Silver)
In short, a year does not need to pass on the actual items themselves because the concern is with the value and reaching the threshold on the day zakah is due.
Answered by Shaykh Bilal Brown, Director of Fiqh Answers.
“It is not necessary for the commodity of trade to be at the nisab (threshold) except at the end of the lunar year. So when the nisab is reached at the end of the year, zakah is obligatory to be paid. If it does not, it is not obligatory. This is regardless of whether one bought the commodity which reached the value of the nisab or was less than the nisab.”
(Bushra al-Karim, p409 [Jeddah: Dar al-Minhaj, 2004])
“The conditions for zakah on trade stock are the lunar year and the nisab at the end end of the lunar year.”
(Minhaj ut-Talibin, p170.Jeddah: Dar al-Minhaj, 2005])
Zakah on trade stock is due when one lunar year has passed from the point when one bought the commodity with the intention of trading. If one did not have the intention of trading at the point of buying the stock but later on they decided to use it for trading, then the lunar year begins the moment the stock has begun trading.
The stock does not have to remain in one’s possession for one lunar year in order for the zakah to be payable at the end of the lunar year. Rather, the moment the intention to trading (as aforementioned) is present, then the lunar year begins whether or not the merchandise itself remains. The lunar year will only cease to continue with one of the following reasons:
1. One intends to cease the items from trading;
2. One sells the merchandise for money and its value falls below the nisab. If it does not fall below the nisab, the lunar year will not cease.
If either of the two occurs, the lunar year ceases and a new lunar year begins from the moment of that sale.
In addition, zakah is only payable on trade items as long as the value of the stock equates to or exceeds the nisab of gold/silver (the minimum amount [value] of gold/silver necessary for one to pay zakah) at the end of the lunar year. It does not matter whether the value of the item goes over or below the nisab during the lunar year. The consideration of the nisab is only important in the case of commodity for trade at the end of the lunar year. So, at the end of the lunar year one will calculate the value of their stock on that day. If it equates to the nisab or more on that day, they will pay 2.5% of the total value as zakah. If it does not, there is no zakah due upon those items.
Answered by Shaykh Mohammad Jamili, Teacher at Fiqh Answers.
“If the initial trade goods have reached the threshold (nisab) for zakah, then its profits are also subject to zakah when the lunar year is completed for the initial trade goods. If the initial trade goods are less than the threshold, then the year for the initial goods and profits begins when they reach the threshold.”
When the value falls below the threshold, the year is terminated.
(Muntaha al-Iradat [2:185-186])
Although the value falls below the threshold, zakah could still apply if it is combined with gold or silver. In the Muntaha, it states:
“The value of trade goods is combined with either gold or silver or both [as fractions to complete the threshold].”
(Muntaha al-Iradat [2:261-262])
Answered by Shaykh Najam Khaja, Teacher at Fiqh Answers.