Definition of Shares/Stocks Zakat

According to the Language: The word 'saham' comes from an Arabic word that means “a part owned”.

According to the Term: Stock according to the Dewan Dictionary means "Part in the capital of a business."

According to the Economic Dictionary, shares mean the legal capital of a company contributed by the owner.

Shares are money invested in a company or business. For share certificates in a company listed on the stock market (Bursa Malaysia example), it is easy to turn into cash compared to shares in an unlisted company or in a cooperative.

Shareholders are the owners of the company and share in the profits or losses of the company. The performance of a business can usually be measured through dividends distributed and also the price or value of shares as listed on the stock market.

Capital Market Investment (Bursa Malaysia)

In Malaysia, the Securities Commission (SC) is the body responsible for controlling and supervising the capital or stock market. The capital market is the main house that provides activities for the income of funds and long-term investments and increases the liquidity of the financial system. In this capital market all kinds of stocks and funds are traded.

Among the examples of investment instruments in the capital market are:

• Ordinary and Preferred shares
• Trust shares, either through a private or government fund manager
• Real Estate Investment Trusts (REITs)
• Exchange Traded Fund (ETF)
• Other investment instruments traded on Bursa Malaysia or capital markets abroad

In general, there are 4 main categories of capital market products namely:

• Equity (Shares / Unit Trusts / REITs / Index Funds / ETFs etc.)
• Bonds & Debentures
• Derivatives (Options & Futures)
• Structured Products

Share Zakat Assessment Method

Stocks are money invested in a company or business. It is a proof of the choice of a business.

For stock certificates in a company listed on the Stock Exchange, it is easy to turn into cash compared to shares in an unlisted company or in a cooperative.

The obligatory zakat value is 2.5% of the investment value at the end of Haul. For traded investments, the amount of cashed profits throughout the year should be mixed.

= (investment value at end of Haul + cashed profit) x 2.5%

Shares in Bursa Malaysia (Shares)

ZAKAT ON STOCKS WHICH ARE NOT LISTED IN PRIVATE COMPANIES, COOPERATIVES ETC

For zakat on stocks/shares owned by private companies or cooperatives, the Selangor State Fatwa Committee Meeting decided that the zakat law on them is as follows:

Zakat on shares is required to be issued by the company based on the law of khultoh (mixed property). However, if the company does not pay zakat, then the obligation of zakat must be fulfilled by the individual.

Scenario 1: Zakat Paying Company

This method shows the business zakat calculation method of companies (private and public) which was approved in the Selangor State Fatwa Committee Meeting on 26 March 2007 (refer to the Business Zakat Guide published by LZS 2007).

Company business zakat in brief is according to the following two methods:-

• Working Capital Method = (Current Assets – Current Liabilities) +/- Adjustments
• Capital Gain Method = (Owner's Equity + Long-Term Liabilities – Fixed Assets – Non-Current Assets) +/– Adjustments

Scenario 2: Company Does Not Pay Zakat

Zakat is imposed on individuals based on the percentage value of the individual's holding in the company.

Example of assessment:

The property of the company/cooperative that is required to pay zakat at the end of the 2012 haul is RM10 million.

• Syarikat ABC Sdn Bhd business zakat: RM10 million x 2.5% = RM250,000
• Ali's shareholding in Syarikat ABC Sdn Bhd : 15%
• Ali's share zakat : 15% x 250,000 = RM37,500

Nisab Zakat 2022 : RM 19,973.00

Nisab Zakat 2023 : RM 20,978.00