if assets are owned by a corporation, a government institution or some other collective entity are they liable for the tax?
I do not think zakat is a “tax”. It is a moral obligation but not required (well…maybe required but I am not sure). You do it depending on your ability.
I honestly have no clue how it really works but to your question I would guess it is not a company’s obligation.
Any company is comprised of people. Whether the company is privately or publicly owned the profits (assuming there are some) go to the owners and perhaps the employees. It is then incumbent upon them to meet their obligations in this respect.
well, zakat is supposed to be computed from wealth, not income. In business terms, from “capital”. So would wealthy and not overly religious people in Saudi Arabia avoid wealth taxation by keeping their wealth assigned to a corporation under their control?
Simple answer; no.
If it were the IRS or your ex-wife’s divorce lawyer doing the counting… I would think if you owned shares in a corporation which owned a bank account of $10 million, those shares would be valued at $10 million divided by the number of shares. Wealth you own does not disappear just because you give it to someone else to hold, unless that person is your useless trash of a brother-in-law… 
perhaps instead of easy to price shares the control could be accomplished via some harder to accurately price instruments?
Also, so how do the government institutions work in this respect? Suppose an individual Muslim businessman is supposed to pay 2% of the price of his factory every year. Now suppose he sells the factory to the government and now it is a “State factory”. Or maybe “bonyad factory”. Does the State or the charitable foundation, which do not have any apparent “owner”, have to pay zakat?
Governments* do not usually collect Zakat. It is done by individuals. It is something that is a duty in personum. In the same way that you don’t have cooperation fasting or praying, rather a group of individuals; in the same way it is an individual who pays zakat; not a factory or a government.
*Government of Pakistan did from 1980 till the mid nineties when it was declared unconstitutional.
my question refers to situations where zakat is mandatory. AFAIU such a situation now exists in Saudi Arabia. It seems to have also existed in the Rashidun khalifate, hence it is a practice that may spread in the future as part of the general Islamic revival.
Hello. My first post on this forum, but a long time lurker. I am a Malaysian Muslim. Malaysia has a well developed Zakat system, or rather, systems. Each state of the Federation has their own Zakat collection body (Baitulmal). I am from the state of Selangor and the Zakat body here is the Lembaga Zakat Selangor (LZS) (Selangor Zakat Body). It is under the direct control of the Sultan of Selangor, not the Federal government. However, you could claim Federal tax deductions (up to a limit), same like you can for any charitable donations. Warning! Info dump ahead.
For those of you who want to know, for Muslims, zakat is a religious act, equal to praying and fasting. Its main function for the payer is to spiritually cleanse his wealth from impure sources that had inadvertantly come to his possession. The main function of zakat for society is to prevent excessive accumulation of wealth, especially the hoarding of gold among one person and to ensure the poor are looked after. A side effect it to recirculate currency and capital and to also lessen the jealousy of the poor towards the rich.
Coming back to the GP’s question, yes, businesses must pay the zakat, at least in Malaysia. The LZS has a website here: http://www.e-zakat.com.my/ (unfortunately only in Malay) but on the current front page, you can see a picture of a GM of the Proton Car company giving a mock cheque of zakat to the Sultan of Selangor. There is a FAQ section, also in Malay (http://www.e-zakat.com.my/soalan-lazim/#tab4) about business zakat. I will translate some of it for you:
Q: What is the legal argument (dalil) for making business zakat compulsory?
A:…A hadith as told by Samurah: “Verily, the Prophet Muhammad told us to pay the Zakat from the stock that we are going to sell…” As narrated by Abu-Daud.
Q: How is the business zakat calculated?
A:There are 2 methods used:
Growth Capital
It takes into account the ownership interest of the business entities, sources of financing and made adjustments to either mixed or otherwise. In more simple terms it is the capital plus the profits (my bolding).
Owner’s Equity + Long Term Liabilities - Fixed Assets - Non-Current Assets + / - Adjustments = Business Prices Subject to Zakat Calculation
Working Capital
It takes into account the current assets of business, less the current liabilities of the business and made adjustments with some things related to the charity that should be taken into account. These adjustments are made either by adding items that have been identified should be added or deducted.
Current Assets - Current Liabilities + / - Adjustments = Business Prices Subject to Zakat Calculation
You can also Google translate the rest of the page. I don’t pretend to fully understand what I have posted above because I am not a CPA. I’m only a 9-5 employee and only pay my personal income zakat through online banking. Different countries might have a different system, depending on which school of jurists that they follow (Malaysia officially follow the Shafiee school). Malaysia also has a well developed Islamic banking system.
Also, Muslim governments don’t pay the zakat because they are the ones collecting. However, some Government-Linked-Corporations (GLC) do pay the zakat. A further clarification, in Malaysia, all matters pertaining to Islam is the purview of the member states of the Federation, i.e. the state governments, with a Sultan as the ultimate head. Hence, the zakat body being controlled by the Sultan, not the Federal government. States that don’t have a Sultan such as the former Straits colony, Penang, have the Yang Di-Pertuan Agong (King) (elected among the Sultans every 5 years) as the head of Islam.
Also, not everyone has to pay the zakat, except for a special zakat called “zakat fitrah”. Only Muslims pay zakat, obviously. You have to meet the minimum amount of wealth to be eligible to pay and meet other requirements. Gold worn for jewellery is also included in zakat if it exceeds a certain amount. Zakat Fitrah is payable in Ramadan and costs the equivalent of 2.70 kg of rice/grains for every man women and child in a household. This is given to the poor so that they can also celebrate the Eid. To receive zakat, you also have to in addition to being a Muslim, be in one of the 8 categories (asnaf) eligible for aid. These are:
Fakir
The absolute poor. Hobos will probably fit into this category.
Miskin
The poor i.e. people who have some wealth but is not enough for day to day living.
Amil
People officially deputised to collect Zakat
Muallaf
Recent converts to Islam.
Riqab
Slaves who want to free themselves. (Islam highly encourage the manumission of slaves).
Gharimin
People who are deeply in debt (due to good causes).
Fisabilillah
For the good of Islam (a broad, catchall category, e.g. scholarships)
Ibnu Sabil
Stranded travellers
How much you get depends on your situation and how much is budgeted. There is no fixed amount. I have had friends who were out of money, get zakat money so that he can travel home from uni during semester break. The LZS also funds scholarships for students to do Islamic studies overseas.