How business zakat is worked out
The app follows two published methods and shows which rule every line follows. This page explains them in plain words, side by side.
AAOIFI and NZF side by side
| Topic | AAOIFI Standard 35 | NZF |
|---|---|---|
| Nisab | 85 g of gold (or 595 g of silver) | 612.36 g of silver recommended for mixed assets (or 87.48 g of gold) |
| Rate for a lunar year | 2.5% | 2.5% |
| Rate for a solar year | 2.577%, or 2.5775% in a leap year | 2.577% (NZF advises the lunar year) |
| Money owed for services | Counts | Doesn’t count |
| Stock | Selling price on the zakat date; cost only when that is extremely difficult | Retail value; from a balance sheet, add the gross margin |
| Raw materials | Count at market value; supplies such as fuel don’t | Count, at their value in their current state |
| Debts payable within 12 months | Deducted | Deducted, but deduct only what you need to |
| Long-term loans | Instalments due in the coming year | Next year’s repayments, without interest |
| Debts that paid for fixed assets | Not deducted; mixed debts pro rata | Deducted like other debts |
| Interest owed | Never deducted | Never deducted |
| Provisions | Not deducted until paid | Not addressed; the app doesn’t deduct them |
| Deposits paid | Count once, when they come back | Not addressed; the app counts them as money owed |
| Interest still held, to give away | Not part of the zakat base | Stays in the zakat base |
| Nisab for a business with partners | The business as a whole | Each partner’s share |
| Fixed assets and intangibles | Don’t count | Don’t count |
| Prepaid expenses | Don’t count | Don’t count |
The calculation in one line
A business pays zakat on what it owns that is money, or meant to become money, less what it has to pay within the coming year. That difference is the zakat base. When the base reaches the nisab, the zakat is one fortieth of it: 2.5% for a lunar year.
Zakat base = zakatable assets − debts payable within a year. Zakat = zakat base × rate.
The app uses the net assets method of AAOIFI Shari’ah Standard 35. The starting point is the balance sheet on the zakat date, not the profit for the year: a business that made a loss still owes zakat on what it holds (2/3/1–2/3/2).
What counts
- Cash and bank balances, including savings accounts and balances at payment providers (5/1/1). Foreign currency is converted at the rate on the zakat date.
- Money owed to the business that you expect to receive: unpaid invoices, VAT to reclaim, loans you gave (5/3/1). Bad and doubtful debts don’t count until they are collected.
- Deposits paid for rent or services count once, for one year, when they come back (5/1/5/3). NZF’s guidance, which doesn’t single them out, is followed as money owed: they count every year.
- Stock held for sale, at what it would sell for on the zakat date (5/2/2). See valuing stock below.
- Raw materials that become part of your products, at market value, and work in progress, at its value in its current state (5/2/8–5/2/9).
- Investments held to sell, at market value. Long-term stakes count by their share of the other company’s zakatable assets; the app counts all of the stake unless you set a lower share. A company you hold that works out and pays its own zakat isn’t counted again (4/2/5): tick that on its line.
- Gold and silver, and property bought to sell, at today’s value.
What doesn’t count
- What you use to run the business: equipment, vehicles, premises, furniture, software, goodwill and other rights (4/1).
- Assets you rent out, such as a building let to a tenant (4/2). The rent you have kept is in your bank, and counts there.
- Prepaid expenses and advances to suppliers (5/3/4/5–5/3/4/6).
- Supplies used up in the business, such as fuel and cleaning products (5/2/8).
- Bad and doubtful debts (5/3/1).
What is deducted
Debts payable within the coming year reduce the zakat base (2/1/1):
- suppliers you owe (6/3/2) and taxes that are due (6/3/10);
- accrued bills and wages (6/3/8), and payments received for work not yet done (6/3/9);
- short-term loans, overdrafts and credit cards (6/3/7);
- of a long-term loan, only the repayments of the amount borrowed that fall due in the next 12 months.
What isn’t deducted
- Interest, whether paid or owed (6/2/4).
- Provisions, such as holiday pay, warranties and pensions, until they are paid (7/2–7/3).
- The rest of a long-term loan, beyond the next 12 months.
- Under AAOIFI, debts that paid for equipment, vehicles or premises (6/2/2). A loan that paid for both kinds of assets is deducted pro rata: if 60% of the business’s assets count for zakat, 60% of the loan is deducted (6/2/3).
- Capital, reserves and profit. They belong to the owners; they aren’t debts (6/1).
Valuing stock
Zakat values stock at what it would sell for on the zakat date, not at what it cost (AAOIFI 5/2/2; NZF). A balance sheet shows cost, so the app asks for the selling value of each stock account.
If you don’t know it, there are two fallbacks. AAOIFI allows cost only when finding the selling price is extremely difficult. NZF’s balance-sheet method adds your gross margin to the stock figure: sales of 50,000 with a cost of sales of 40,000 give a margin of 20%, so stock of 10,000 counts as 12,000. The app works out the margin from the revenue and cost-of-sales accounts in your trial balance, or you type it in.
The nisab
Zakat is only due when the zakat base reaches the nisab. AAOIFI sets it at 85 grams of gold, or 595 grams of silver (3/2/2). NZF uses 87.48 grams of gold or 612.36 grams of silver, and recommends silver when someone holds a mix of assets: it is the lower threshold, and better for the people who receive zakat.
The app checks the base against the price on your zakat date, from daily gold and silver prices and the European Central Bank’s exchange rates. You can type in another price, for example your jeweller’s.
With AAOIFI the nisab is held against the business as a whole, since the standard works out a company’s zakat at company level (2/1/1). With NZF it is held against each owner’s share, since each partner is liable for their own share. Either can be chosen. The nisab is also about a person’s total wealth: if an owner’s share is below it but their savings bring them above it, tick that box and the zakat is worked out anyway.
Lunar or solar year
The zakat year, the hawl, is a lunar year of 354 days (3/2/4). If your zakat date is a Hijri date, such as 1 Ramadan, the rate is 2.5%.
Many businesses prefer their financial year end. A solar year is about 11 days longer, so the rate rises to 2.577%, or 2.5775% in a leap year under AAOIFI. NZF gives 2.577% and advises the lunar year.
Hijri dates follow the Umm al-Qura calendar. Where you live, the month may start a day earlier or later after the moon is sighted.
Owners, partners and shareholders
- Sole trader: the owner pays all of it.
- Partnership: each partner pays for their share. One partner may pay for the others with their consent.
- Company: under AAOIFI the company pays when the law, its articles or its shareholders’ meeting say so (2/2/1). Otherwise each shareholder pays for their share, and the company tells them the zakat per share (2/2/5).
The statement shows each owner’s share of the base and of the zakat. Owners who pay separately can be left out of the total. An owner who doesn’t owe zakat, such as a shareholder who isn’t Muslim, is left out of the zakat base altogether, as the International Islamic Fiqh Academy’s Resolution 28 asks of companies.
Purifying interest
Interest the business received isn’t part of zakat. Scholars advise giving it away to charity without expecting a reward. The app adds up the interest accounts in your trial balance and shows that amount separately, together with any other income you mark as impermissible. With AAOIFI that money is also left out of the zakat base, since zakat is due on the principal only and the interest isn’t the business’s (5/1/3); NZF doesn’t deduct unlawful income, so with NZF it stays in.
What the app doesn’t decide for you
- Your intention. Whether property or shares are held to sell or to keep decides whether they count. You choose the category.
- Which scholar to follow. The app shows both methods and every choice; it doesn’t rule on differences of opinion.
- Your personal zakat. Savings, gold and investments outside the business aren’t part of this calculation.
- Paying it. Zakat goes to the recipients named in the Qur’an (9:60). The app keeps track of payments, but doesn’t collect or pass on zakat.
Sources
- AAOIFI Shari’ah Standard No. 35: ZakahAccounting and Auditing Organization for Islamic Financial Institutions. The net assets method; clause numbers on this page refer to it.
- NZF Business Zakat Guide (2025)National Zakat Foundation, UK: what counts, stock valuation, deductible liabilities, ownership.
- NZF: NisabGold and silver weights, and why NZF recommends the silver nisab.
- NZF: Can a solar year be used for zakat calculation?The 2.577% rate for a solar year.
- NZF: Business liabilitiesWhich debts can be deducted, and the 12 lunar month limit.