Calculating Zakat on U.S. Stock Ownership
Updated March 30, 2022

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Zakat Calculation Spreadsheet

Zakat House Encyclopedia

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​Purpose
The above spreadsheet file assists investors in calculating the Zakat on publicly-traded U.S. stocks purchased with a long-term investing intention.

• Different Zakat rules apply to stocks purchased with a short-term trading intention (generally, short-term investments are treated as cash for Zakat purposes).
• This calculation method does not apply to funds (SPY, VNQ, etc.).

Calculation Method Explained
The calculation follows the simple premise that Muslims are obligated to pay 2.5% of untouched (unused) wealth, savings, or assets. Working capital assets (such as real estate property) used to generate revenue are not covered under Zakat's obligation.  An investor needs to calculate their ownership portion of Assets that fall under the Zakat domain and donate 2.5% of that amount.

1. There is general agreement among scholars that in a corporation's context, Current Assets are considered "Zakatable Assets."
2. A part of the current assets may be tied to Debtors, and Shariah Law indicates that debts be deducted from an individual's Zakatable Assets for Zakat calculation. We operationalize two viable methods to factor out the Liabilities portion from Zakatable Assets:
        a. Method 1 deducts Current Liabilities from Current Assets.
        b. Method 2 multiplies Current Assets by the proportion of Equity relative to Total Assets.
3. The investor can then multiply their ownership percentage in the company to arrive at the portion of Zakatable Assets. This results in the investor's individual obligation (based on his stock ownership), which is then multiplied by 2.5% to arrive at the amount to donate.
   

​​The formulas for both methods are demonstrated below:

References & Resources
An important resource for this effort was Kuwait Zakat House's Zakat Encyclopedia, which compiles much information about paying Zakat, both in general and related to investments. 

• General Zakat Guidelines (أحكام الزكاة) - Arabic
• General Zakat Guidelines (أحكام الزكاة) - English
• Zakat on Stock Investments ​ ​

​Disclaimer
This work results from voluntary efforts to calculate Zakat on international investments. None of us have formal education or training in Islamic Finance but attempted to interpret and apply Zakat laws as logically and accurately as possible after research the topic and applying our knowledge in Accounting and Investment Finance. Several Fatwa sources were considered to develop the two  calculation methods in the worksheet, which are both supported by logic and scholars.
​Contributors: Yousef Abdulsalam, Khaled Abdulsalam, Fahad AlAbdullah

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