How to Calculate Zakat on Business Assets: Inventory, Cash & Receivables
Entrepreneurs and business owners bear a profound spiritual and civic responsibility to purify their commercial enterprise through annual Zakat. However, business balance sheets contain complex asset categories: physical manufacturing machinery, office buildings, work-in-progress inventory, customer trade receivables, and vendor accounts payable. Which business assets are subject to Zakat, and which are completely exempt?
The General Rule: Fixed Assets vs. Working Capital
EXEMPT FROM ZAKAT (Fixed Assets & Tools of Trade)
Machinery, factory buildings, office real estate, computers, delivery vans, intellectual property, and equipment used in the operation of the business are 100% exempt from Zakat.
SUBJECT TO ZAKAT (Liquid Working Capital & Inventory)
All assets intended for sale or liquid circulation—including finished goods inventory, raw materials for production, trade cash, and collectible customer invoices—are fully subject to Zakat.
The Business Zakat Calculation Formula
Under AAOIFI Shariah Standard No. 35 (Zakat), the standard Net Working Capital method is applied:
Net Zakat-Eligible Business Capital =
- (+) Business Cash on hand and in bank checking accounts
- (+) Finished goods inventory (valued at wholesale / current selling price)
- (+) Raw materials intended for manufacturing goods
- (+) Accounts receivable (invoices expected to be collected from solvent clients)
- (–) Short-term business debts due immediately / within the current operating cycle (vendor payables, employee wages due, utilities)
Total Zakat Due = Net Zakat-Eligible Business Capital × 2.5%
Worked Example: E-Commerce / Retail Company
- Business Checking Balance: $45,000
- Warehouse Finished Inventory (Cost/Wholesale): $80,000
- Outstanding Customer Invoices (Good Debt): $15,000
- Total Zakat-Eligible Assets: $140,000
- Less Vendor Accounts Payable (Due this month): -$25,000
- Net Zakat Base: $115,000
- Zakat Due (2.5%): $2,875.00
Frequently Asked Questions
How should I value inventory: Cost price or Retail selling price?
The majority of contemporary scholars recommend valuing inventory at current wholesale market replacement value (what it would cost to liquidate or restock today), rather than the marked-up retail price.
Do I pay Zakat on bad or uncollectible debts?
No. Accounts receivable that are doubtful or severely delinquent are not included. If a delinquent client unexpectedly pays in a future year, pay Zakat on that amount for one year upon receipt.
Written by Md Mamunur Rasid
Md Mamunur Rasid is the founder and lead financial systems researcher at EthicVestor. He specializes in algorithmic compliance for Islamic capital markets, Shariah equity screening (AAOIFI Standard 21), and quantitative personal wealth modeling.
Learn more about our editorial methodology →