Wednesday, November 22, 2017 - 4 Rabi' al-Awwal 1439
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Paying zakat on buildings and factories

If a person rents out several buildings other than the one in which he lives, should he pay zakat on their total value or on the income he receives from them? What about the zakat on a factory, should it be paid on the total value of machinery and equipment?

Answer

No zakat is payable on the house in which a person resides, whether he lives in it alone or with his family. As for houses, buildings or real estate that are held for investment, there are two possibilities. The first applies to those that are rented out.

Zakat is due on the rent after deducting any expenses for maintenance, repairs or services. This applies if the person owns more than nisab [the minimum that necessitates zakat] which is equivalent to the value of 85 grams of gold. The second possibility applies when a person buys a house to sell at a later date at a profit. Here the house is similar to any other trade commodity and zakat is therefore due on its full value.

Factories, machinery and equipment are considered fixed capital. Zakat is due on the income generated from them and not on their value. All expenses incurred in generating this income, i.e. overhead expenditure, are deducted first and zakat is calculated on the net income.
And God the Almighty knows best.
 

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