Question :

Could you clarify the Islamic ruling on the Zakat (alms) due on the savings of the employees subscribing to the staff provident fund? and to take into consideration what follows: First: The employee pays 2.5% from his basic salary to the Fund. Second: The company pays 2.5% of that salary to the Fund. Third: According to the system of the above Fund, each employee who subscribed for two years or more is entitled to borrow money from it. Fourth: According to the system of the above Fund, and after three years of subscribing to it, each employee can collect his subscriptions as well as those made by the company, but in case he resigned before that period, he is entitled to take only his subscriptions. Fifth: According to the system of the above Fund, each employee, who has spent five years or more working for the company or subscribing to the Fund{which comes first}, can borrow a maximum of 50% from his overall savings. Sixth: The employee can make purchases in line with the regulations of the Fund. Seventh: No profits have been distributed until now. Eighth: All transactions and investments conducted by the Fund comply with Sharia.

The Answer :

All perfect praise be to Allah, The Lord of The Worlds, and may his peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Zakat due on employees` savings in staff provident funds should be as follows:

First: The employee who had resigned before he/she finished the first three years of subscription should pay the Zakat of the amount that he received from the Fund, only for one lunar year, provided that it has reached Nissab (Minimum amount liable for Zakat). Moreover, this amount shouldn`t be added to other amounts because he could neither collect it nor dispose of it. Accordingly, after he collects that amount, he should pay its Zakat for only one lunar year.

Second: If he has completed three years of subscription, then Zakat becomes an obligation because he is at liberty to withdraw his savings from the Fund and dispose of them the way he likes. Therefore, he should calculate whatever sums he is entitled to receive; namely, deductions from his salary or from the company, or profits made by the Fund, then he should pay (2.5%) as Zakat if his savings reached Nissab and one lunar year has passed over possessing them, and this way is easier than calculating the Zakat for each sum separately.

Third: If an employee borrowed a sum of money, then he should pay its Zakat if it reached Nissab and one lunar year has passed over possessing it because possession is the reason that makes Zakat obligatory.

During its sixteenth session, the International Islamic Fiqh Academy issued a resolution regarding Zakat due on employees` savings, it reads as follows: "The ruling varies according to the type of account in which the savings are deposited. If they are deposited in an account that belongs to the employee and he has the right to choose how they should be invested, then they should be added to his other assets which are liable for Zakat in terms of Nissab and period of possession. However, if he has no authority as to this account, then it isn`t liable for Zakat because he doesn`t own it completely until he collects it, and by then he should pay its Zakat for only one lunar year." And Allah Knows Best.