Zakat Guides
Zakat on Business
By the Editorial Team · reviewed against our sources · updated September 2026 · guidance, not a fatwa
Quick answer: A business pays 2.5% on its net zakatable assets: cash, plus inventory valued at sale price, plus receivables likely to be collected, minus short-term liabilities. Fixed assets used to run the business, premises, equipment and vehicles, are not zakatable. Each owner pays on their share of the net figure.
Key takeaways
- Zakat is 2.5% of net zakatable business assets, not turnover or profit.
- Include business cash, inventory at sale value, and collectable receivables.
- Exclude fixed assets: premises, machinery, equipment, furniture and vehicles.
- Deduct short-term liabilities such as supplier payables, wages and taxes due soon.
- Value inventory at current selling price on your zakat date, not cost.
- In partnerships and companies, each owner pays on their share of the net assets.
What business zakat actually charges
A frequent misunderstanding is that business zakat is a tax on profit or on sales. It is neither. Zakat is a charge on the net zakatable assets the business holds on its zakat date, calculated once a lunar year. A highly profitable business that has spent everything may owe little, while a quieter business sitting on cash and stock may owe more. The obligation follows accumulated, liquid, trade-related wealth, not the income statement, and it is assessed on a single snapshot day rather than averaged across the trading year.
The building blocks are the same ideas used throughout zakat. Trade goods and cash are zakatable; tools of the trade are not; and genuine near-term debts reduce the base. The classification of stock as trade goods (urud al-tijarah) is the same principle that makes resale property zakatable, as explained on the zakat on property page.
The formula
The working formula is straightforward:
Net zakatable assets = business cash + inventory (at sale value) + collectable receivables − short-term liabilities. Then zakat = 2.5% of that net figure, provided your overall wealth is above the nisab threshold and a lunar year has passed.
Everything else in the business, the premises you trade from, the machines you use, the vans and computers, sits outside this calculation. The rest of this guide takes each component in turn so you can see exactly what goes in and what stays out.
Zakatable assets: cash, inventory, receivables
Three items make up the zakatable side. Business cash means money in the tills, bank accounts and any liquid reserves held by the business. Inventory means the stock you hold for sale, and it is included at its current expected selling price on your zakat date, not what it cost you. This aligns business zakat with the trade-goods principle. Receivables are amounts customers owe you that you reasonably expect to collect; these represent wealth that is effectively yours, simply not yet in hand. Together these three are the liquid or near-liquid assets that zakat is designed to reach, the same logic behind zakat on cash.
Fixed assets are not zakatable
Assets used to operate the business are excluded across all the major schools. Your shop or warehouse, manufacturing machinery, office equipment, shelving, furniture, and delivery vehicles are working tools, not merchandise held for sale. You do not pay zakat on their value, however large it is. The test is purpose: an item held to run the business is exempt, while an identical item held as stock to sell is zakatable. A car dealer pays zakat on the cars on the forecourt (stock) but not on the recovery truck used to move them (a tool). The same distinction settles most borderline questions in a trading business.
Work-in-progress and raw materials
Manufacturing and service businesses often hold partly finished goods and raw materials. These are generally treated as trade assets and included, because they are on their way to becoming saleable products. You value them at their expected sale value, or a reasonable estimate where a part-finished item has no direct market price yet. Consumables that are genuinely used up in operations, rather than sold on, are closer to tools and are treated more leniently, but core raw materials destined for products are normally counted.
Which liabilities you can deduct
You may deduct short-term liabilities, the debts due in the near term, from your zakatable assets. These include trade payables owed to suppliers, wages owed to staff, taxes that are due, and loan or finance instalments falling due soon. What you generally do not do is subtract the entire balance of a long-term loan; most contemporary scholars deduct only the portion due in the near term (often understood as within about twelve months). This keeps the calculation fair, a long-term expansion loan should not erase years of zakat in a single stroke.
Doubtful debts and uncollectable receivables
Not every receivable is real wealth. A debt you reasonably expect to collect is included. A debt that is doubtful or unlikely to be recovered can be left out, and a common approach is to add such a debt to your zakat only in the year you actually receive it. The guiding idea is honesty: count what you truly expect to have, neither inflating your assets with bad debts nor hiding wealth you genuinely control.
Partnerships and companies
Where a business has more than one owner, zakat on the business assets is shared according to ownership. You calculate the business’s net zakatable assets once, then apply each partner’s or shareholder’s percentage stake, and each person pays 2.5% on their portion. A shareholder in a trading company effectively pays zakat on their share of the underlying zakatable assets, which is closely related to the treatment covered under zakat on stocks. Each owner then combines that figure with their personal wealth when testing against nisab.
Worked example
Yusuf runs a retail shop and calculates zakat once a lunar year. His figures on his zakat date are below.
| Item | Zakatable? | Amount |
|---|---|---|
| Business cash and bank | Yes | 15,000 |
| Inventory (at sale value) | Yes | 40,000 |
| Receivables likely to be collected | Yes | 5,000 |
| Shop premises | No (fixed asset) | excluded |
| Fittings, till, delivery van | No (fixed asset) | excluded |
| Supplier payables due soon | Deducted | (8,000) |
| Wages and tax due soon | Deducted | (4,000) |
| Net zakatable assets | 48,000 | |
| Zakat due at 2.5% | 1,200 |
Net zakatable assets = 15,000 + 40,000 + 5,000 − 8,000 − 4,000 = 48,000. Zakat at 2.5% = 1,200. Notice that the valuable premises and van play no part, and that stock is counted at sale value, not cost.
Practical tips for business owners
Pick a fixed zakat date and take a simple stock-and-cash snapshot on that day each year, it turns an intimidating task into a short annual exercise. Value inventory realistically at what you could sell it for, keep a note of which receivables are genuinely collectable, and separate operating tools from saleable stock in your own records so the line is clear. If your accounting is complex, or you carry large long-term financing, put the specifics to a qualified scholar or an Islamic finance specialist rather than approximating.
Bringing it together
Business zakat is one part of your overall obligation. Once you have your net zakatable business figure, add it to your personal zakatable wealth and test the total against nisab. If you are new to the process, start with what is zakat, follow the method in how to calculate zakat, and then use the calculator on the homepage to total everything and apply the 2.5% rate.
A final reminder on scope. Business zakat covers the trading entity’s assets, but you as an owner may also hold personal cash, gold, shares or property that carry their own zakat. Keep the two calculations distinct so you neither double-count nor miss anything, and remember that a genuinely loss-making year with little cash or stock may leave you below nisab and owing nothing at all. The point of the annual review is simply to measure what you actually hold on one fixed day, then give the small, fixed share that is due.
This article is guidance only and is not a fatwa. Zakat rulings vary by madhhab and by individual circumstance; please consult a qualified scholar before acting on your own situation.
Frequently asked questions
How do I calculate zakat for a business?
Add your business cash, inventory valued at sale price, and receivables you expect to collect, then subtract short-term liabilities. Apply 2.5% to the net figure. Fixed assets like premises, equipment and vehicles used to run the business are excluded from the calculation.
Are business premises and equipment zakatable?
No. Fixed assets used to operate the business, such as premises, machinery, computers, furniture and vehicles, are not zakatable. They are working tools rather than trade goods, so their value is left out of the zakat calculation entirely.
How is inventory valued for zakat?
The majority contemporary view is to value stock at its current expected selling price (market value) on your zakat date, not its cost price. You count finished goods held for sale, and typically raw materials and work-in-progress that will become saleable products.
Which liabilities can I deduct from business zakat?
You may deduct short-term liabilities due in the near term, such as trade payables to suppliers, wages owed, taxes due, and loan instalments falling due soon. Long-term debt is usually not deducted in full; most scholars deduct only the near-term portion.
Do I pay zakat on money customers owe me?
Receivables you reasonably expect to collect are included in your zakatable assets. Debts that are doubtful or unlikely to be recovered can be excluded, and many scholars say you add such a debt only when it is actually received.
How is zakat handled in a partnership or company?
Each partner or shareholder is responsible for zakat on their share of the net zakatable business assets. You calculate the business's net zakatable assets, then apply each owner's percentage stake, and each person pays 2.5% on their portion.
Is work-in-progress zakatable?
Generally yes. Partly finished goods and the raw materials that will become saleable stock are treated as trade assets and included, usually valued at their expected sale value or a reasonable estimate of it on your zakat date.