A Mudhaarabah transaction with a fixed profit and unfixed tax rate

31-7-2014 | IslamWeb

Question:

There is a business which is run by government,in which profit is apparently fixed because at the time of taking profit from them,they impose tax on profit with unfixed rate,therefore the profit amount is changed because of this subtraction.. Is this Halal as the profit is NON-FIXED at the time of collecting it?Like I invest 100 dollars,for one year they tell me to give 10 dollars but they may give me 8 or 7 dollars ... Is it halal ?

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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.

If the agreement between the capital provider and the entity entrusted with investment is to give him (the capital provider) a fixed amount of profit, as understood from the question, this is impermissible. In such a case, the Mudhaarabah (profit-sharing) contract is invalid and the imposition of a tax that causes the profit to decrease has no effect.

We have highlighted the conditions of the validity of Mudhaarabah in Fatwa 94668, so please refer to it.

Allaah Knows best.