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Section III: Calculating Charity on Goods and Giving It

Firstly: Methodology of Calculation
What is included in the calculation
Anything owned with the intention of commerce is part of the calculation of the overall amount payable as charity. This includes all of the following:
● Goods, regardless of their location, whether they are in storage, on display, or at a stage of distribution.
● Goods at production entities purchased with the intention of manufacture and selling.
● Goods bought by description, or through financing, or through customer order.
● Jewellery intended for commerce.
● Shares purchased with the intention of commerce.
● Land and property purchased with the intention of commerce.
● Everything of benefit purchased with the intention of commerce.
● Storage materials are included if they are part of the sale and are bought by the consumer.
● Materials used in manufacture are included if they remain in the product.
● Materials for dying, tanning, or oiling leather.
● Materials whose effects remain in the product, like sugar, ghee, butter, milk, and so on, if they are used as ingredients in the making of sweets or the like.
What is not included in the calculation
Anything not intended for sale is not included in the calculation; this includes:
● Fixed assets. [863] The second symposium for modern legal charity matters convened in Kuwait in 1989 gave the decision that fixed assets are included in the calculation, even if there is no charity payable on it. This is so that it is made in return for investment loans, such that if investment loans are equal to or exceed the fixed assets of a company, then these loans are not included in the charity payable by the company.
● Capital.
● Reserves.
● Real revenue made.
● Intangible assets: like the franchise name and its popularity, trademark, copyright, as long as none of this was purchased with the intention to sell it, since only assets where charity is payable are considered.
● Tangible assets: like furniture, used real estate by the company whether for storage or as offices, containers for goods that are not sold along with it, like bottles where perfume is stored, machines used for work like AC and fans, machines for manufacture, like sewing or knitting machines, or concrete mixers and their like, vehicles used for transportation, both for staff and product transportation.
● Real estate if the company uses it as its headquarters or offices.
● Storage materials of cardboard and plastic and its like, as long as it is used for storage purposes only and are not sold to the customer.
● Things not sold with the goods, like the plates inside which foods may rest.
● Materials used in the manufacturing process that remains in the product, like salt or dyes or the like, are included; but materials that are used for manufacture but do not remain in the product are not, like soaps, cleaning products, or oils used for cooking purposes or as fuel.
● Materials for feeding livestock.
Calculating the manufacturing process
Factory manufactured products, [864] Some modern scholars have made a distinction between a manual and an artificial manufacturing process, the latter being the norm in the majority of factories A machine is an asset and goes back to the owner’s capital, not the workforce. For this reason, Malikis only considered manually manufactured products due to craftsmanship. and products that are the purpose of manufacture, are calculated as raw material when purchased without the value added through skill or effort in production. This has been explicitly mentioned by Ibn Lubb al-Maliki, and it is the verdict of the Ministry of Religious Verdicts in Kuwait. The ruling of charity on raw materials for manufacture
Charity is wajib for raw materials used for manufacture, [865] Like iron used to manufacture machines, or wood used to manufacture furniture, or sugar used for the production of sweets, and so on. This is different from materials used to aid in the manufacturing process but are not part of the final product, like fuel and oil to power machines. and they are included in commercial goods, and its calendar year is that of its constituent parts. This is the decision of the seventh symposium on modern legal charity matters. The price according to which goods are calculated
Modern scholars have differed over commercial goods and their charity calculation [866] The evaluation of the goods is done through the market, and this is considered at the time charity is to be made payable, not on the day they were purchased. There is no distinction here between desirable and undesirable goods. They are all evaluated at the conclusion of a calendar year, then charity is calculated based on said evaluation. in terms of price, whether it is in terms of the wholesale or individual product price. This is according to many views, the strongest of which are two:
The first: is that it is according to the wholesale price. This is chosen by al-Qaradawi, and in its accordance was the verdict of modern legal charity symposiums.
The second: is that it is wholesale for the one who sells it in wholesale, and individual for the one who sells it individually. This is the position adopted by the eleventh symposium or modern legal charity matters, and the Accounting and Auditing Organization for Islamic Financial Institutions.
As for the one who buys some of his products wholesale and others individually, then he acts upon what he sells in predominantly. The place where charity is payable
The place where the wealth lies is what is considered, not the owner. Charity is calculated and made payable in the land where the goods are sold. This is the position of the majority: Hanafis, Shafi`is, and Hanbalis. Charity for business partners
There is no charity payable for either business partner until there is a nisab applicable for each of them individually. This is the position of the majority: Hanafis, Malikis, Hanbalis, the old position of al-Shafi`i, [867] For Malikis, and in the old position of al-Shafi`i, mixtures in ownership have no impact except in livestock. and the majority of scholars.
Secondly: Paying the Charity on Commercial Goods The amount payable of charity on commercial goods
The amount that is wajib to pay in charity on commercial goods is 2.5%, by agreement of the four schools of jurisprudence. The formula for charity on commercial goods
Charity payable = (money + the value of goods + loans expected back – debts) × 2.5
Charity payable = (money + the value of goods + loans expected back – debts) ÷ 40 The ruling of paying charity on commercial goods from said goods
Scholars have differed over the permissibility of using commercial goods over which charity is payable to pay said charity, and this is according to many views, the strongest of which are two:
The first: is that it is wajib to pay the charity as the value of goods, and it is not sufficient to give the goods themselves in charity. This is the position of the majority: Malikis, Shafi`is, and Hanbalis.
The second: is that it is permissible to pay the charity in the form of the physical goods themselves if for a need or some valid benefit. This is the position of the Hanbalis, chosen by Ibn Taymiyyah, and it is the decision of modern legal charity symposiums.

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