Q: What is the ruling in relation to paying zakāh on outstanding invoices owed to my business?
For e.g. if a wholesaler sells his merchandise to retailers on credit; How should the wholesaler treat the outstanding amounts on the invoices for the purposes of zakāh?
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A: The debt generated by the credit sale is also categorised as a ‘strong debt’[1]. Thus, the wholesaler will remain liable to pay zakāh for the outstanding amounts on the invoices.
However, the obligation to pay zakāh only matures upon receipt of the value of 40 dirhams (or the equivalent thereof). Thus, for each 40 dirhams (or the equivalent thereof) received one dirham will be payable as zakāh. The wholesaler may also choose to pay zakāh for the outstanding amounts each year even prior to their recovery and thus avoid the accumulation of payable zakāh.
[1]For a detailed breakdown, please see The Categorisation of Debt for Zakah Purposes research paper on the Al Qalam website.