Zakat on wealth is a key consideration for investors, particularly when investing over extended periods and across diversified, ever-evolving portfolios. In this article, we aim to provide a clear and practical guide to understanding the process of calculating and paying zakat on investment portfolios within Malaa.

In line with our commitment to simplifying investment processes and related matters such as zakat, Malaa has developed a feature that allows you to automatically pay your zakat when the annual due date (hawl) for your investment portfolio is reached. This is made possible through our collaboration with the "Zakati" platform, which is affiliated with the Zakat, Tax, and Customs Authority.

By default, portfolios come without the automatic zakat feature. To activate it, please follow these steps:

Example

Let's assume an investor opened an investment portfolio on 1/1/2023 but made their first deposit on 1/1/2024. In this case, the zakat year (houl) won’t begin because the portfolio hasn’t reached the nisab threshold until the deposit is made. No zakat will be due for the previous period. The zakat year will start from the first deposit date, and the next zakat due date will be 365 days later.

Another Example:

Let’s assume the investor opened a portfolio on 1/1/2023 and made their first investment on the same day (1/1/2023). They then deposited 1,000 SAR at the beginning of each month. When the portfolio reaches the zakat year (houl) on 31/12/2023, the investor will receive a notification that zakat is due on the total value of the portfolio (assuming no gains or losses for simplicity, so the portfolio value is 12,000 SAR). Therefore, zakat will be due on the entire zakatable base (the full portfolio value), regardless of the deposit dates, since zakat is calculated on the whole portfolio, not on individual deposits.

Another Example:

Let’s assume the investor opened a portfolio on 1/1/2023 and made their first investment on the same day (1/1/2023), with the invested amount reaching the zakat nisab threshold. The zakat year (houl) will start from that date. (You can confirm the zakat year by clicking the "More Details" button in the Zakat & Fees section of the portfolio details.) On 30/12/2023, the investor will receive an automatic zakat notification showing the amount due, with a reminder that it will be deducted within two days.

Another Example:

Let’s assume the investor opened a portfolio on 1/1/2023 and made their first investment on the same day (1/1/2023), with the invested amount reaching the zakat nisab threshold. The zakat year countdown started. However, the investor withdrew the entire amount, and the portfolio value became 0 SAR on 30/11/2023 (one month before the zakat year was complete).

Then, the investor made another deposit one week before the zakat year ended, and the amount was enough to meet the nisab threshold. In this case, the portfolio will automatically be subject to zakat on 31/12/2023.

Even though the investor had emptied the portfolio earlier, the zakat year (houl) is still calculated, and once the portfolio reaches the required nisab threshold, zakat will be activated. Regardless of the withdrawals or deposits made throughout the year, the zakat obligation is calculated based on the zakatable value at the end of the zakat year.

Since Zakat calculations depend on disclosures from fund managers, Malaa updates these figures regularly as new disclosures become available.

Zakat is calculated from the first day the investment is made, which is determined by the date of the first deposit into the portfolio, not the account opening date. The account can be opened without any deposits for a period, and this period will not be included in the zakat calculation. Zakat is calculated based on a full Hijri year. At the end of the zakat year, the zakat is calculated on the zakat base (the total value of the portfolio) on the last day of that year. The zakat is deducted from the entire zakat base, which includes the total value of the portfolio, not just the individual deposits. For example, if a deposit is made just one day before the zakat year ends, that deposit will be included in the zakat base for that year and counted toward the zakat calculation.

Notification Before Zakat Deduction and Control

To ensure proper zakat management, you will receive a notification via the Malaa app two days before the zakat is deducted. This notification will inform you of the amount of zakat that will be deducted. At that time, you can choose to stop the automatic zakat deduction by disabling the automatic zakat feature, using the same method mentioned earlier.

As previously stated, the automatic deduction of zakat may be delayed for a legitimate reason, in accordance with Section 4.3 of the Guidelines on the Jurisprudential Provisions of Individual Zakat issued by the Zakat, Tax and Customs Authority. This delay is to allow for the calculation of the zakat base for each fund, as investment funds typically publish their financial reports on a quarterly or annual basis, particularly in the case of mutual funds.

Regarding the advancement of zakat payment, it is permissible to pay zakat up to two years in advance. This is supported by the narration that Al-‘Abbas (may Allah be pleased with him), the uncle of the Prophet Muhammad (peace be upon him), sought permission to pay his zakat in advance, and the Prophet granted him permission [narrated by Abu Dawood, Al-Tirmidhi, and Ibn Majah]. In another narration, the Prophet accepted the zakat of Al-‘Abbas two years in advance [narrated by Al-Qasim ibn Sallam in Kitab Al-Amwal].

Those who wish to adjust the timing of their zakat payment to coincide with virtuous periods—such as the month of Ramadan—may do so by paying zakat before the completion of the year. In this case, the zakat is considered an advance payment, as a full year has not yet passed on the zakatable wealth. A new zakat due date would then be set starting from the month of Ramadan.