Zakah on shops including customer debts

Assalaamu alaykum. Last year, I started a business with my partner and we invested 40 lacs in it, out of which we bought two shops for 32 lacs and the stuff for our shop for 8 lacs. After a year passed, we did the calculations of our shop, and we had a benefit of about 5 lacs. At the same time, however, we came to know that we have about 7 lacs outside, within the hands of our customers, and we are not sure whether this sum of money will come back or not. Now my question is: How do we have to pay zakah for this business? Do we have to calculate the money that we have spent to buy the shops? Also, do we have to calculate the money that is outside with our customers, and we are not sure about that?

All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad is His slave and Messenger.

There is no zakah on the value of the two shops that you bought because there is no zakah on fixed assets like real estate, shops, and the like if they are not prepared for sale, but you are obliged to pay zakah on the merchandise that you bought with the purpose of selling it because these are tradeable items.

Accordingly, each one of you must evaluate his own share in the merchandise and the profit when one lunar year elapses on them (while they are in your possession) and see if they reach the Nisaab (minimum amount liable for zakah); if they do, then he should pay 2.5% zakah on it. Of course, other money and tradeable items that each one of you owns in addition to the above should be added to the money to complete the Nisaab, but none of you should add his money to the money of his partner in order to complete it. For more benefit, please refer to fatwa 122007.

As regards the debts that you are owed from your customers, then there are two cases:

The first case:

If the debtor is solvent and not denying the debt (i.e. he is willing to pay); then the zakah on this money is an obligation on the creditor for all the years. But according to Imaam Ahmad, the creditor pays (the zakah) when he receives the debt money. According to Imaam Ash-Shaafi’i, he must pay zakah for the debt along with his own money at the end of each lunar year because it is like a trust deposited with the debtor. The opinion of Ash-Shaafi’i is more prudent.

The second case:

If the debtor is insolvent or procrastinating or denying the debt; then, in this case, some scholars are of the view that the creditor does not have to pay any zakah on this money, and when he receives it, he starts counting a new lunar year.

Some other scholars said: The zakah on this money must be paid for the previous years by the creditor when he receives it, while others said: When he receives the money he pays zakah on it for one year only.

Ibn Qudaamah summarized this issue by saying:

“If the debtor is solvent (has the ability to pay the debt), then the creditor is not obliged to pay the zakah until he receives the money, and then he pays for the previous years. This is if the debtor acknowledges the debt and is willing to pay it. This is the view of Ath-Thawri and Abu Thawr, whereas Uthmaan, Ibn ‘Umar, Jaabir, Taawoos, An-Nakha'i, Jaabir ibn Zayd, Al-Hasan, Maymoon ibn Mihraan, Az-Zuhri, Qataadah, Ash-Shaafi'i, Is-haaq, and Abu ‘Ubayd are of the view that he must pay the zakah immediately even if he does not get hold of the money because he is capable to take possession of it and dispose of it, so he is obliged to pay the zakah just like on the deposited trust.

If, on the other hand, the debt is on a person who is insolvent (in financial difficulty) or someone who denies it, then there are two narrations (from Imaam Ahmad) about it: one view is that zakah is not obligatory..... This is the view of Qataadah, Is-haaq, and Abu Thawr, because the creditor is not able to make use of it. The second narration is that he pays the zakah for the previous years when he actually receives the money: this is the view of Ath-Thawri, Abu ‘Ubayd and Umar ibn Abdul-‘Azeez ... Al-Hasan, Al-Layth, Al-Awzaa'i, and Maalik are of the view that he pays zakah on it for one year only when he receives the money.” [Abridged]

Allah knows best.