From islamic-finance
Activate for: zakat, zakatable assets, nisab, zakat calculation, institutional zakat, ZATCA zakat, zakat and ushr, sadaqah, non-Shariah income purification, charity payable Islamic, zakat on bank accounts, zakat disclosure, zakat journal entry.
npx claudepluginhub panaversity/agentfactory-business-plugins --plugin islamic-financeThis skill uses the workspace's default tool permissions.
Zakat is the obligatory Islamic alms payment — 2.5% of qualifying wealth above the nisab threshold,
Routes Islamic finance queries to the correct product skill and jurisdiction overlay. Activate for any query involving Islamic banking, AAOIFI, Shariah- compliant finance, sukuk, takaful, murabaha, ijarah, musharaka, mudaraba, salam, istisna'a, zakat, or Shariah screening. Covers 20 jurisdictions across 3 accounting regimes (AAOIFI-primary, IFRS with Islamic guidance, local standards).
Provides Japanese tax advice on deductions, filings, business expenses, and 2025 rules using reference files for accurate consultations.
Routes banking regulatory queries to the correct product skill and jurisdiction overlay. Activate for any query involving IFRS 9, ECL, expected credit loss, Stage 1, Stage 2, Stage 3, SICR, PD, LGD, EAD, Basel III, Basel IV, CET1, RWA, capital ratio, LCR, NSFR, HQLA, ICAAP, stress test, AML, KYC, CDD, EDD, SAR, STR, sanctions, OFAC, HMT, PEP, FATF, reconciliation, nostro, suspense, FRTB, market risk RWA. Covers 7 jurisdictions across multiple regulatory regimes (PRA, ECB/EBA, Fed/OCC, APRA, MAS, CBUAE, SBP).
Share bugs, ideas, or general feedback.
Zakat is the obligatory Islamic alms payment — 2.5% of qualifying wealth above the nisab threshold, calculated on a lunar year basis (354 days). Its treatment for Islamic financial institutions varies significantly by jurisdiction.
| Jurisdiction | Mandatory? | Formula | Rate | Payer | Filing |
|---|---|---|---|---|---|
| Saudi Arabia | Mandatory (ZATCA) | ZATCA equity-based formula | 2.5% p.a. | IFI pays to ZATCA | Annual ZATCA return |
| Pakistan | Mandatory (deduction at source) | Deduction on savings accounts | 2.5% on qualifying accounts | Bank deducts as agent | 1st Ramadan each year |
| Bahrain | Voluntary (institutional) | AAOIFI GS9 / Hanafi | 2.5% p.a. | IFI may pay on behalf of shareholders | Annual disclosure |
| Malaysia | Voluntary | AAOIFI GS9 / Hanafi or Shafi'i | 2.5% p.a. | IFI voluntary; disclose | Annual disclosure |
| UAE | Voluntary | AAOIFI GS9 | 2.5% p.a. | IFI voluntary; disclose | Annual disclosure |
| UK | Not applicable | N/A | N/A | Individual obligation only | N/A |
| Nigeria | Voluntary | AAOIFI GS9 | 2.5% p.a. | Voluntary | Annual disclosure |
The nisab is the minimum wealth threshold above which zakat becomes obligatory. Two measures, take the lower (traditionally silver nisab is used for financial assets):
Gold nisab: Equivalent of 87.48 grams of gold (at current gold price) Silver nisab: Equivalent of 612.36 grams of silver (at current silver price)
Check the current gold/silver price to calculate the nisab in local currency. For Islamic banks with large balance sheets: the nisab is almost always exceeded. Still check and document the check annually.
Lunar year minimum balance rule: Zakat is payable on the MINIMUM BALANCE of zakatable wealth maintained continuously throughout the lunar year — not the year-end balance. If wealth fell below nisab at any point during the year, recalculate from that point.
Step 1 — Identify zakatable assets: ZAKATABLE (trade wealth and liquid assets):
NOT ZAKATABLE (productive fixed assets / long-term investments):
Step 2 — Identify current liabilities due within the lunar year:
Step 3 — Calculate Zakat Base: Zakat Base = Zakatable Assets - Current Liabilities
Step 4 — Apply nisab check and calculate zakat: If Zakat Base > Nisab: Zakat = Zakat Base x 2.5% If Zakat Base <= Nisab: No zakat payable (unlikely for a bank)
Saudi Arabia's Zakat, Tax and Customs Authority uses a different formula:
Zakat Base = Share Capital + Retained Earnings + Statutory Reserves + Other Reserves - Fixed Assets - Long-term Investments - Unamortised Expenses
This is an EQUITY-BASED formula — it starts from equity, not from liquid assets.
Apply the Saudi jurisdiction overlay for ZATCA-specific line-item mapping.
Note: For Saudi IFIs, ZATCA zakat REPLACES income tax for Saudi-owned companies. Foreign-owned portions of the bank pay income tax; Saudi-owned portions pay zakat. Ensure correct proportional calculation if the bank has mixed Saudi/foreign ownership.
Pakistan's Zakat and Ushr Ordinance requires banks to DEDUCT ZAKAT AT SOURCE:
From which accounts: Savings accounts, Profit and Loss Sharing (PLS) accounts, and other qualifying deposit accounts.
When: On the first day of Ramadan each lunar year.
Rate: 2.5% of the account balance on that date (if balance >= nisab threshold).
Exemptions: Account holders may claim exemption by submitting a declaration form.
The bank's role: The bank is an AGENT (wakeel) for the Central Zakat Administration. The bank deducts zakat from each qualifying account and remits it to the Zakat Fund.
Journal entry in bank's books: On deduction date: Dr: Depositor's Account [Zakat amount] Cr: Zakat Payable — Central Zakat Administration [Zakat amount]
On remittance to Zakat Fund: Dr: Zakat Payable — Central Zakat Administration [Zakat amount] Cr: Cash / Remittance Account [Zakat amount]
Note: This is NOT the IFI's own zakat — it is a DEDUCTION ON BEHALF OF depositors. Do not recognise as the IFI's expense. Merely a pass-through.
When an IFI receives income from non-Shariah-compliant sources: Examples: penalty charges that cannot be retained, inadvertent interest income, conventional bank income during conversion, dividend from a company with >5% non-halal income.
This income CANNOT be retained by the IFI. It must be donated to charity (sadaqah) — it is not a deductible expense for zakat purposes.
Journal entry: Dr: Non-Shariah Income Received [Amount] Cr: Charity Payable — Purification [Amount]
On payment to charity: Dr: Charity Payable — Purification [Amount] Cr: Cash [Amount]
In the income statement: Show as a separate line "Purification / Charity Donation" NOT as operating income of the IFI.
In AAOIFI disclosures: Mandatory disclosure of non-Shariah income amount and the charity to which it was donated, confirmed by SSB review.
For ZATCA (Saudi Arabia): zakat return filing reference number. For Pakistan: aggregate zakat deducted from depositors and remitted.