What is the ruling on the profits of shares and investment certificates, and their related Zakaah?

All perfect praise be to Allaah, the Lord of the worlds. I testify that there is none worthy of worship except Allaah and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.

The opinion about Zakah of shares is established on the consideration of those shares in view of the issuing company. If it is a purely industrial company and practices no commercial activity like the case with hotel management companies, naval/land/air transportation companies and airlines, then no Zakah is due on their shares in so much as on their profits. If the profits attain the due nisab and a lunar year elapses on them from the moment of holding them, one-fortieth (2.5%) should be given for Zakah.

But if the shared company is of a commercial nature, in the sense that it buys and sells goods, like the companies of importing and raw materials, then Zakah is due on the capital as well as on the profits of their shares. Zakah on them should be paid according to their market value, whether equal to, more, or less than the price for which they have been bought. If they have no market value, then the Zakah should be given on their value, according to the assessment of experienced people.

This ruling applies to shares in industrial companies if the shareholder intends, by buying the share, to trade in it.

If the shareholding company is of a mixed industrial-commercial nature, for example, the converting companies which buy/extract raw materials, manufacture them and then trade in them, like petroleum, textile, and iron and steel companies, then Zakah is due on the shares, after deducting the value of buildings and equipment owned by the company.

As for Zakah of investment certificates which entail postponed payable debts that yield interest for the creditor, Zakah should be paid on them annually, in case they reach the due Nisaab, and this is according to the opinion of the majority of scholars. This Zakah is due only on the capital because the interest taken on those debts is usury that one should get rid of by spending on the public welfare of Muslims.

It should be noted that buying investment certificates with the interest of a certain percentage for their holder is unlawful usury, and therefore impermissible. It is also unlawful for a Muslim to buy shares in a company of which the activities are forbidden by the Sharee'ah for by sharing in it he would be a partner by as much as what is equal to the shares he owns.

Allaah Knows best.