The following is a draft of proposed zakat law for Maldives. It has been prepared following the “hierarchy of core principles” that I intend to elaborate in my next blog. Comments are welcome.
THE ZAKAT ACT, 201x
Chapter I: General Provisions
Title, Definitions, Objectives, General Principles
Chapter II: Zakat Management Infrastructure
General, Zakat Management in Atolls/ Islands/ Cities
Chapter III: Zakat Collection and Disbursement
Collection of Zakat and Non-Zakat Charity, Distribution and Utilization of Zakat and Non-Zakat Charity
Chapter IV: Accountability and Governance
Financing, Audit, Baitul Maal, Reporting, Public Participation
Chapter V: Grievances, Prohibitions and Penalties
Grievances and Complaints, Prohibitions, Penalty Provisions
Chapter VI: Closing
THE ZAKAT ACT, 201X
[Day Month 201X]
An Act to provide for the better zakat management and for matters connected therewith or incidental thereto.
Be it enacted by the Majlis in the — Year of the Republic of Maldives as follows:
Part One: Title, Definitions, Objectives
This Act shall be called the Zakat Act, 201X.
In this Act, unless the context otherwise requires:
- Zakat management is the planning, implementation, and coordination of the collection, distribution, and utilization of zakat.
- Zakat is part of property that must be given by a Muslim individual or a business entity for a charity giving to entitled recipients in accordance with Islamic law.
- Muzakki is a Muslim or a business entity obligated to pay zakat.
- Mustahiq is the person entitled to receive zakat.
- Ministry of Islamic Affairs hereinafter referred as MIA, is the Ministry of the Government responsible for all matters pertaining to practice of Islam including zakat management.
- Zakat Management Council, hereinafter referred as ZMC, is the national body for management of zakat and other Islamic charity funds under the MIA.
- Baitul Maal is a Fund comprising all zakat and non-zakat charity collections under the ZMC.
- Shariah Advisory Committee, hereinafter referred as SAC is a body of Shariah experts to give Shariah-legal opinion on matters pertaining to management of zakat and sadaqa as requested by the ZMC from time to time.
Zakat management aims to:
- maximize the efficiency of zakat collection and effectiveness of zakat utilization; and
- optimize the benefits of zakat for public welfare and poverty alleviation.
Part Two: General Principles
- Zakat includes zakat maal and zakat fitr.
- Zakat maal referred to in paragraph (1) is levied on various forms of wealth, assets, output and earnings.
- Zakatable assets and wealth include, but are not limited to:
- gold, silver, and other precious metals;
- cash and other securities;
- trade and business inventory;
- Zakatable output and earnings include, but are not limited to those from:
- agriculture, horticulture, and forestry;
- livestock and fisheries;
- revenues and services, and
- Zakat maal shall also be levied on zakatable assets, output, earnings in addition to paras (3) and (4), as determined by the ZMC in consultation with the Shariah Advisory Committee.
Zakat payment is compulsory on individuals and business entities who own wealth, assets, output and earnings that are zakatable as per this Act and subsequent rules and regulations formulated under this Act.
- Zakat maal shall be levied on a property that is under clear and unambiguous ownship of an individual or business entity.
- If a debt is inherent in the property that is subject to zakat, such debt shall be first deducted from the property before computation of zakat liability.
Notwithstanding the fact of ownership of property, a property shall not be zakatable under the following conditions:
- The property has no earning potential
- The owner is not empowered to spend from the property
- Property is being used for private or personal usage
- Property is being used as evidentiary asset.
- Where a property belongs to more than one person, zakat shall be determined on the basis of pro rata shares held by each individual, whilst considering the property as jointly-owned property (or severally-owned property).
- Severally-owned property or jointly-owned property stated in Para (1) of this Article includes private businesses organized as partnerships and companies.
- Property of the state and government organizations and service administrations, city councils, atoll councils and island councils; or similar property are not zakatable, except when this is in the nature of investments.
- Zakatable property as stated in Para (1) of this Article, shall include the property of all commercial ventures and companies that the government may own shares of.
Property that have been set aside specially for the benefit of the general public, or from the property of non-profit entities such as trust funds and non-government organisations are not zakatable.
- In order to be zakatable, the asset must be in ownership of the muzakki for atleast one lunar year (hawl).
- In order to be zakatable, the asset or the output/ earnings must exceed the nisab as defined by Islamic law.
- Zakat cannot be levied on asset/ output/ earnings that has already been subjected to zakat during a given year.
- Terms, conditions and methods of zakat calculation shall be in accordance with the Islamic law and shall be provided by “Rules of Zakat Calculation” as formulated by ZMC in consultation with the Shariah Advisory Committee.
- Further provisions regarding the requirements and procedures for zakat calculation shall be determined by the ZMC.
- Provisions regarding collection and distribution of zakat al-fitr shall be provided by the “Rules of Zakat al-Fitr”
ZAKAT MANAGEMENT INFRASTRUCTURE
Part One: General
- The competent authority on behalf of the State in the administration of zakat shall be the MIA.
- A dedicated national body for zakat management, called the Zakat Management Council (ZMC) shall be established and staffed, within 14 days of this Act being promulgated by its publication in the official government gazette.
- The ZMC shall function as an integral and constituent body within the MIA.
- The ZMC shall deposit all zakat and non-zakat charity funds in a dedicated account, to be called, the Baitul Maal
- The ZMC shall maintain separation between zakat and non-zakat charity funds that are part of the Baitul Maal.
- In carrying out the tasks referred to in Article 13, ZMC shall have the following functions:
- planning the zakat management process, i.e. collection, distribution, and utilization of zakat;
- implementation of the zakat management plan;
- monitoring and controlling the zakat management process, and
- reporting the operational performance of zakat management.
- The ZMC shall manage all non-zakat charity, except waqf.
- In carrying out its duties and functions, ZMC is to work with stakeholders in accordance with the provisions of the legislation.
- A Shariah Advisory Committee (SAC) shall be constituted by the MIA to advise the ZMC in Shariah issues relating to zakat management.
- Members of the SAC shall be appointed and dismissed by the MIA.
- Members of the SAC shall comprise eminent scholars of Islamic law.
- SAC shall deliberate on issues relating to zakat management referred by the ZMC from time to time and share its opinion with the ZMC.
- Further provisions on procedures for administration of SAC shall be elaborated by MIA.
- SAC shall be led by a chairman and a vice-chairman.
Zakat Management in Atolls/ Islands/ Cities
- Each atoll council and each city council except Malé, shall provide full support and coordination to the ZMC in order to receive zakat from the respective constituents, to distribute zakat, send a predetermined portion to ZMC. In addition, each island council shall coordinate in full with atoll councils in all issues with respect to zakat management.
- The portion of zakat to be sent to ZMC, as stated in (1) of this Article, shall be decided by the MIA after considering the total wealth received from each local community, the number of people eligible to benefit from zakat, the degree of poverty among the people, and based on the information provided by the local councils regarding this issue.
- A dedicated staff shall be identified in every atoll council, island council, and in every city council excluding Malé, to represent the ZMC and to ensure zakat management in accordance with the provisions of the Act and relevants Rules and Regulations.
- The dedicated staff, as stated in (2), shall be a civil service employee and shall be appointed after consultation with the MIA and the Civil Service Commission.
ZAKAT COLLECTION AND DISTRIBUTION
Part One: Collection of Zakat and Non-Zakat Charity
- A muzakki can do self calculation of zakat obligation
- A muzakki can seek help from ZMC to calculate its zakat obligation.
ZMC may appoint a bank or financial institution or any other body to act as its agent for collection; distribution or both of zakat and non-zakat charity funds.
All zakat funds collected by ZMC shall be placed in the Baitul Maal.
ZMC can, in addition to zakat, collect sadaqa, infaq, tabarruat and all non-zakat charity funds (except waqf), which shall be placed in the Baitul Maal.
Zakat paid by muzakki to ZMC shall be eligible for full rebate in income tax.
- ZMC shall provide receipt of zakat payments to each muzakki.
- The receipt as referred to in paragraph (1) shall be used to by the muzakki to claim rebate in income tax payable.
Further provisions relating to the enforcement and compliance mechanisms for zakat management shall be defined and elaborated by the MIA.
Part Two: Distribution and Utilization of Zakat and Non-Zakat Charity
- Zakat shall be distributed to mustahiq among the asnaf or persons considered eligible in accordance with Islamic law.
- The persons considered eligible include the fuqara (poor), the masakin (pauper), the fi-riqab (under bondage), the gharimun (heavily indebted), muallaftul qulubum (those whose hearts are inclined towards Islam), ibn-sabeel (traveler), amileen alaih (zakat officials) and fi-sabilillah (in the path of Allah SWT)
- Specific criteria for categorization of asnaf, definitions or eligible criteria for recepients of zakat shall be defined in the “Rules of Zakat Distribution”, which shall be formulated by ZMC in consultation with the Shariah Advisory Committee.
- The zakat allocation ratios for various categories of eligible recepients, shall be determined by the ZMC in the light of priorities based on the principles of equity and justice.
- A muzakki has the right to distribute in private, up to 20% of the amount that corresponds to its zakat liability.
- If a muzakki exercise its right stated in Para (1) of this Article, and distributes any portion of zakat, in private, to those rightfully eligible to receive zakat, the details of the recipients shall be submitted in the declaration provided in Appendix 1 of this Law, to the ZMC, or to the respective council office.
- Zakat can be utilized for productive activities in order to alleviate poverty and to improve the quality of life.
- Utilization of zakat for productive activities referred to in paragraph (1) shall be done after fulfilling the basic needs of the mustahiq.
- When zakat is utilized for productive activities, the poor or the beneficiary must be made the owner of the zakat paid to him/her in conformity with the principle of tamleek either as individuals or as a group.
- Further provisions for productive utilization of zakat as mentioned in paragraph (1) shall be determined by ZMC.
- ZMC shall strive to distribute the entire amount of zakat collected in a given year during the same year with no carry forward to the next year.
- Surplus zakat in the Baitul Maal, only as an exception, may be carried forward or invested for short-term in safe avenues.
The distribution and utilization of sadaqa funds shall be in accordance with Islamic law and shall consider the intention of the giver, if explicitly communicated.
- Surplus non-zakat funds in the Baitul Maal should be invested in safe avenues in a prudent manner.
- Guidelines for prudent investment of surplus funds shall be formulated by the ZMC.
ACCOUNTABILITY AND GOVERNANCE
Part One: Financing
- To perform their duties, ZMC shall be financially supported by State Budget and part of zakat collection.
- ZMC may utilize a small part of the zakat collected, not exceeding one-eighth, to cover the overall cost of collection or to incentivize the collection activity by entities acting as agents of ZMC.
Part Two: Audit
- In order to maintain the reliability of the process of zakat, the Auditor General’s Office of the Maldives shall perform an annual audit of the ZMC.
- In addition to ZMC, the respective councils and all other parties involved in zakat management, shall extend full cooperation and assistance to the representatives of the Auditor General’s Office to perform this audit.
- During the audit, if it is discovered that proper documentation procedure has not been followed, the auditors shall have the right to hold the responsible staff accountable in order to investigate and clarify the details of the issue.
Part Three: Baitul Maal
- The funds received in the form of zakat and non-zakat charity shall be deposited in the Baitul Maal as a separate specialised account with the the Maldives Monetary Authority.
- Funds as stated in para (1) of this Article shall not be mingled with other sources of government funds.
- Funds as stated in para (1) of this Article shall not be deemed as property of the state.
- Separate books shall be maintained for zakat and non-zakat funds.
- All correspondence during the process of mobilizing zakat into the Baitul Maal shall be in writing.
Part Four: Reporting
- ZMC shall compile a report on the zakat management periodically.
- ZMC must submit the report to the MIA on a regular basis.
- A compiled report on zakat management should be available in printed and electronic media every quarter.
- Further provisions on reporting mechanism shall be determined by the MIA.
Part Five: Public Participation
- The public may participate in advising and supervision of ZMC.
- Advising referred to in paragraph (1) shall be in order to:
- increase public awareness to give charity through ZMC, and
- provide suggestions for improving the performance of ZMC.
- Supervision as referred to in paragraph (1) takes the form:
- access to information about the management of zakat by ZMC, and
- delivery of information in case of irregularities in the management of zakat by ZMC.
GRIEVANCES, PROHIBITIONS AND PENALTIES
Part One: Grievances and Complaints
- If the muzakki discovers that the amount paid as zakat is in excess of the obligatory amount, it may claim back the additional amount by requesting the ZMC, along with details of the calculations, within one month of having submitted the money.
- If such a case as stated in para (1) of this Article is not submitted within one month, the muzakki shall not have the right to submit such a request later.
- If the ZMC discovers that zakat has been received in excess of the requirement, para (2) of this Article does not prevent the initial owner being given the opportunity to provide in writing what could be done next, in response to being notified of the excess, as per the rules to be made under this Act.
- If there is a valid claim for recovering any excess, it shall be done as per the procedure described in the rules, by considering the next year’s zakat to be paid by the same muzakki.
- It is the responsibility of the MIA to audit and confiscate anything that is due as zakat but has not been paid. The MIA has complete authority in the confiscation of such property.
- The MIA has right to obtain any assistance that may be required in order to complete the undertaking defined in para (1) of this Article, from respective government administrations.
- All State Institutions shall provide full cooperation in assisting the MIA, if such assistance is requested, in order to collect unpaid zakat funds as defined in para (1) of this Article.
- In case anybody has any grievance or complaint regarding zakat, this may be submitted to the ZMC or via the island council, to the staff appointed as the representative of ZMC at the atoll council.
- Such complaints shall be submitted in writing, within 2 months of the occurrence of the issue, to the relevant authority as stated in para (1) of this Artcile.
- There shall be no fees applicable to any such complaints.
- Any issue regarding zakat shall not be sent to a court of law, unless the complaints process described in paras (1) and (2) of this Article has been followed, by submitting the complaints to the relevant authority, and only if the issue is deemed to have been resolved unsatisfactorily.
- If the resolution of the complaint is deemed unsatisfactory, the matter may be lodged at a court of law within a period two months of the date of notification of the decision, or from the date when the outcome is known, whichever is later. If, within such period, the matter has not been submitted, it shall be concluded that the matter has been resolved in full.
- Even though deadlines are stated as such paras (4) and (5) of this Article, based on delays in the decision about complains submitted to the ZMC, after a written request for a speedy decision is not acknowledged appropriately; or based on a valid cause evidenced by written documents that justify the delay in missing the deadline for submitting appeals, or there is sufficient cause to believe such reasoning, this Article does not prevent the courts from accepting and proceeding with such a case.
Part Two: Prohibitions
Every person is prohibited from owning, pledge, grant, sell, and / or divert zakat, sadaqa and / or other non-zakat charity funds that exist in its management.
It is forbidden to deliberately engage in the collection, distribution, or utilization of zakat without the consent and/or authorization by the ZMC.
Part Three: Penalty Provisions
Any person who intentionally unlawfully distributes zakat according to provisions of Article 25 shall be punished with imprisonment of 5 (five) years and / or a maximum fine of MVR 500000.
Any person who willfully and unlawfully violated the provisions of Article 40 shall be punished with imprisonment of 5 (five) years and / or a maximum fine of MVR 500000.
Any person who willfully and unlawfully violated the provisions of Article 41 shall be punished with imprisonment for a maximum of 1 (one) year and / or a maximum fine of MVR 50,000.
The rules and regulations of this Act should be set no later than 1 (one) year from the Promulgation of this Act.
This Act comes into force on the date of promulgation. In order to ensure full public knowledge and compliance of the provisions of this Act, this shall be published in the State Gazette of the Republic of Maldives.