Using black money in real estate transactions

21-5-2014 | IslamWeb

Question:

It is a norm in our city that builders/re sellers are asking to pay 15-20% white money and remaining 80-85% in black money to purchase a property. The reason is the municipality fixes rates of the area (which is the 15-20% white money) but due to high demand in area, builders/resellers sell the property at a very high profit margin (which they demand in black)There is no receipt for the black money and I personally feel they might hide it from govt. to avoid taxes. There is no choice for us to deal in 100% white money (though we intent to do) as it is a norm in the city. I personally feel guilty paying in black as I might be assisting those builders to avoid tax. please help me understand how we can deal with it in the light of islam. JazakAllah.

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Answer:

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.

There are some details concerning the ruling on the evasion of taxes that are imposed by governments on the sale of goods or the establishment of properties or on the import of goods and so forth. This is because taxes may be legitimate, in which case it is impermissible to evade them or to cooperate with anyone in evading them or seeking to evade them.

On the other hand, taxes might be imposed unjustly, in which case, it is permissible to evade them and to cooperate with someone who tax is unjustly imposed on him. We have explained this in detail in Fataawa 85356 and 203644.

Therefore, one should consider the intention of those sellers; if they intend to evade the taxes as you mentioned, then one should look at the kind of taxes they want to evade, whether or not it is permissible for them to do so.

If the taxes are imposed illegitimately, then it is permissible to make a deal with them according to what you mentioned [as it is permissible for them to evade them].

In case the taxes are permissible, it is an obligation upon those sellers to pay the taxes and it is not permissible to evade paying them, so it would not be permissible to cooperate with them in that regard.

Allaah Knows best.