Question:
What is the Zakat treatment for prepaid expenses?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The Answer:
The prepaid sum is no longer in one’s ownership and as such, it is not Zakatable.
Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or have not yet expired. A prepaid expense is a type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time as the benefit is received onto the income statement, because unlike conventional expenses, the business will receive something of value in the near future.
And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam,
Shariah Advisor
Amanah Finance Consultancy
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