Chapter: Zakat on Debts

Anyone to whom money is owed—whether from a loan he advanced in cash, or from the price of a commodity he owned for trade but, being a non-managing trader, sold on credit—pays no zakat on that debt until he actually receives it. Once he has taken possession of it, he pays the zakat of a single lunar year, regardless of whether the debt had remained with the debtor for one year or for several. He is not required to take the zakat out of other assets. It is preferable—if the debtor is solvent—that he should purify it each year, yet according to Malik this is not obligatory; whether the creditor can easily collect the debt or not, no zakat is due until he has been paid.

My own view is that if the debt is owed by a solvent person, its term has fallen due, and the creditor nevertheless leaves it uncollected, then he must pay its zakat. If the money is merely on deposit with someone and he is able to retrieve it, zakat is due on it; should he leave it there for several years and then take it back, he must pay zakat for all the elapsed years.

As for the debt of an active trader who continuously turns over his capital, he should include it in his zakatable assets—provided the debtor is solvent and trustworthy—just as he appraises his merchandise, because the proceeds reach him gradually rather than in one lump sum. For this reason the debt of a managing trader, together with his stock, is treated as ready cash in its entirety. However, if that trader’s debt arose from a loan, he does not pay zakat on it until he actually receives the money, like any other non-managing creditor.

With respect to concealed property—such as wealth that has been denied by the debtor, usurped, buried in open desert, or lost in a wilderness or elsewhere, so that its owner despaired of recovering it and then found it after years—he must pay zakat for every year that passed.

Another opinion holds that no back-zakat is required in such cases; only the zakat of the current year must be paid.