A company has purchased a building which it leases to a customer for a period of 5 years, with a promise that the leased asset at the end of the lease term, will be transferred to the lessee. Will zakat be due on the value of the building during the leasing period?
According to some scholars, whilst the asset is under the lease period, zakat will be payable every year, only on the revenue generated from the leased of the asset. At the end of the lease term, and before completion of the sale transaction, the owner will pay zakat on the full price of the asset.
These scholars argue that, when the asset is being leased, all the rules associated to ‘leasing’ will apply to it, including the zakat treatment of leased assets. Once the lease has ended and the asset is ready for selling, the zakat treatment will switch to zakat on trading assets.
This opinion is also of the IFA of Jeddah.
According to Sheikh Ali Qaradaghi, zakat treatment on such assets will be dependent on the intention of the method of disposal.
If the owner has the intention of gifting the leased asset at the end of the lease period, then zakat will be payable on the revenue generated, and not the full value of the asset.
If the owner has promised to transfer the leased asset or, to sell it to the lessee at the end of the leased period, then zakat will be due on the total value of the leased asset every year.
And Allah knows best!
(Mufti) Billal Omarjee