Section 5_ Al-Khums Tax_The One-Fifth Tax Levy

 

The Khums is a financial duty that is carried out with the intention of qorbeh to God; in comparison to zekāt, it is obligatory on all possessions except the woman’s dowry and any expected inheritance. The name Khums is derived from the ratio one in five (i.e. 20%). In this introduction, we shall explain the conditions that make the Khums obligatory and some of its general rulings.
686. For the Khums to become applicable, the following conditions must exist:
First and second: Bolūgh and sanity, so Khums is not obligatory on the possessions of young children until they reach bolūgh (the Islamic legal age), nor on the possessions of the insane person until he becomes sane if his insanity is constant; however if his insanity strikes him only sporadically, Khums becomes obligatory on him; the last ruling also applies to the person who repeatedly falls unconscious. That said, an exception to this is the young child’s possession of money mixed with forbidden/unlawful money, in which case the guardian has to pay its Khums even if before he reaches bolūgh.
Third: Islam, so Khums is not obligatory on the non-Muslim during the period when he is a non-Muslim, except if a thimmi person (a non-Muslim in a Muslim country) buys land from a Muslim, he has to pay Khums on it.
Fourth: Threshold in some possessions, such as treasures and minerals, not others, as will be explained.
Fifth: Ownership to a person, so Khums is not obligatory on possessions owned by a party such as the state, institutions, the mosque etc.
Khums is obligatory on possessions owned by a person even if it is owned by many persons.
687. It is not conditional for the Khums to be applicable that the possession is present with the owner – the only thing here is that the owner of a possession that he expects to have returned to him has the choice between paying the Khums when the possession is still not with him and waiting until he gets it back; however, Khums is not obligatory on possessions that are unlikely to return to its owner unless they do return to him, in which case the Khums becomes obligatory.
688. There is no difference in the Khums obligation between men and women, nor between the person who is earning and producing independently and others, if the conditions of obligation are met.

(A) Possessions on which Khums is payable
There are many things, as follows:

First: War booty
689. It is obligatory on the fighter to pay the Khums on war booty that he obtains in a legal (shar’i) war against the infidels, which is the war that is fought with the permission of the infallible (as) when he is present or the permission of the legal (shar’i) authority in the occultation time; anything obtained from them (the infidels) as a booty without war – it is an obligatory precaution not to take it without it (war). This ruling applies in times when it was the fighters themselves who take on their fighting expenses, today, however, when the state is doing that, the more likely ruling is that the booty is the state’s, and the soldiers have in fact become like wage workers.
Second: Minerals
690. We mean by minerals all that comes out of the earth which was created in it and is not part of its living nature, and having a price and value. So Khums is applicable on gold, silver, copper, lead, rubies, sapphires, aquamarines, turquoise, sulphur, petrol, salt and anything that comes under such a description, regardless of whether it lies on the surface or under the ground.
691. It seems that minerals are part of anfāl (spoils, booty), so it is not allowed to be extracted or owned without the permission of the Islamic authority, regardless to that (the booty) being present in lands conquered by force or otherwise.
692. The threshold (nissāb) is conditional in making the Khums on the minerals applicable, which is what has the value of twenty dinars or more, which is approximately ten golden Ottoman lire – that is after the exclusion of the extraction and purifying costs.
693. If the mineral is extracted in one go and it reaches the threshold, there is no problem, but if it is extracted in stages, then if this is (nonetheless) commonly regarded as one extraction process, so the work is almost continuous without separating between the stages of work by more than the usual gaps within one process, in this case it is sufficient that the whole extracted amount over all the stages reaches the threshold. However, if the extraction stages are regarded as separate extraction processes so that long time periods separate each two stages, for external or legal reasons, in this case Khums is not payable on anything that is less than the threshold in each separate stage.
Third: Treasures
694. By treasures we mean valuables concealed in a land, cave, wall, tree etc; it is often money, jewels and precious stones, including nowadays ancient antiquities of high value, such as ancient stones and ceramics.
695. Whoever finds the treasure becomes its owner if it is not known that it has a Muslim owner or is the honoured-property of a non-Muslim, otherwise if the finder knows an owner that owned it up to a recent time, he must return it to him or to his heirs if he can find them; but if he cannot find them after searching for them, the treasure will become an unknown-owner property (mejhūl al-Mālik), in which case he must turn it over to al-ākim ash-Shar’i. However, if the owner was ancient, and heirs are not known, the ruling becomes that of a treasure.
696. It is obligatory to pay the Khums if the treasure reaches – in its minimum value – the first zekāt threshold of gold and silver, which is twenty golden dinars or two hundred silver dirhams, or whatever its value equals that if the treasure is something else other than gold and silver – this is after subtracting the cost of digging etc that was spent to uncover the treasure and dig it out. As far as the threshold is concerned, the same criterion as explained for the stages for extracting minerals should be applied.
Fourth: Diving finds
697. Khums is obligatory on what is found in the sea or great rivers when its value reaches one golden dinar, when this is done by human divers or specialized tools; this includes finds such as jewels, pearls, coral and other minerals and plants that have value; it does not include fish or animals, nor what is picked up from the surface of water. The legal dinar these days equals the value of half an Ottoman golden lire.
Fifth: Property mixed with forbidden/unlawful property
698. We mean by the property that is mixed with forbidden/unlawful property the particular pieces of money or goods that have become mixed with other lawful money or goods and have become impossible to distinguish from them, and that both their value and owner are unknown. The owner of this money or property is not allowed to use it before paying its Khums so as to relieve himself from the responsibility of the misappropriated money in his possession.
Sixth: The maintenance surplus
699. Khums is obligatory on everything that exceeds the maintenance needs of the person that he spends on himself and his dependants across the various fields, from the profits that he made from allowed/lawful means, be it trade, rental, agriculture, ownership, gifts etc, except what he gets from an expected inheritance or the woman’s dowry or the compensation in a khol‘ divorce. Because of the details of this, we have allocated a separate part for it.

(B) The maintenance surplus
What is meant by the maintenance surplus is what exceeds the maintenance needs of the person for his livelihood and that of his dependants from the profits that come into his possession throughout the year. Maintenance is what he spends for his living expenses and needs, including what he spends for profiting and production, to pay his debts, in acts of worship such as pilgrimage and Khums, or in any other expenditure that is acceptable in the Shari’ah.
First: Profits
700. Khums is obligatory on profits, which are the surplus that is left after maintenance: that is, everything that has become the person’s property from any allowable/lawful means, which includes what he has obtained through commercial, industrial or agricultural effort, or through possessing allowed goods, and it also includes what he has obtained without effort, such as gifts, bequeathed items, unexpected inheritance, income from religious trusts (awqāf shari’iyyeh), what the poor have got from the share of the descendants of the Prophet (sawa) (sahm as-Sādah) and all other religion-based money revenues, also what has been obtained from the share of the Imam (as) if it was given for reasons other than poverty, as well as other means of profit. Exceptions to all this – so Khums is not payable on them – are the following:
a- Inherited money/property that is transferred to the person after death, provided it is an inheritance, not a gift during the deceased's life, as happens a lot; for this, i.e. the gift during the deceased's life, is Khums applicable.
b- The woman’s marriage dowry and the man’s khol‘ divorce compensation.
c- Whatever must have its Khums paid immediately, such as minerals and treasures, so there is no Khums payable after a maintenance surplus.
d- Whatever the poor obtain, under their ‘poverty’ status, from the religion-based money revenues from the Khums from the share of the Imam (as).
There is no Khums payable on possession of any surplus left to them after spending all they need for maintenance.
701. In the same way that the original assets of the owned property are regarded as profits, its growth and production are also regarded as profits subject to Khums rulings. The growth which Khums is applicable to is regardless of whether the increase and growth are separate, such as an animal born, milk and wool in the case of livestock, fruits in the case of trees and the like, or that the increase is part of it, such as the small tree growing bigger, the weak sheep becoming fat and the like. Growth is subject to Khums in all possessions, whether the Khums was paid or not, or whether the possessions themselves had applicable Khums or not, such as inherited possessions whether coming for ownership only or trade, this is because growth is a new profit that took place independent of its origin, so it must have its Khums paid like any other profits when all conditions exist.
However, if the growth was a kind of increase in the market value that took place due to economic activities, not because of an additional thing, attached or separate, to the original asset, in this case the ruling differs as follows:
1- The original asset whose value has increased was prepared for trading. Here there are two possibilities: the first is when the original asset is one where it is intended to trade with its growth, keeping its origin year after year, such as milk-cows, egg-laying chickens, transport care and the like, in which case there is no Khums on the increase in the market value as long as the origins are there; but if the owner sells them, then the increase in its value is regarded as part of the profits of the year they were sold, in which case if they were spent during that year, no Khums would be applicable; but if something was left at the end of the Khums year, the Khums is to be paid; the same applies to what is part of production pre-requirements, such as projection halls, factories, production tools etc. The second is when the original asset itself is the subject of trade, such as if someone buys a property, an animal or a car to sell and buy another, making profit in this transaction; in this case every increase in the market value is regarded as profit on which Khums is applicable even if he did not sell it.
2- The original asset is for personal possession and use; in this case no Khums applies to the increase in value in what he owned by buying, for example, if its market value increased when it is still in his possession, unless he sells it; so if someone bought a house to live in for twenty thousand then sold it for fifty thousand, Khums will be payable on the thirty thousand increase when the Khums new year arrives and it is (still) considered a surplus to his maintenance.
3- The asset is of the type on which no Khums is applicable on the outset, such as inherited property; in this case if its value increases and he sells it and uses it for trade, no Khums is applicable to the increase in the value which it had when it was in his possession.
The same ruling applies to the asset that comes into ownership as a gift or transfer of ownership, i.e. in ways other than buying and paying for it in kind, and that Khums was not applicable to it originally, such as if it was part of its belongings which he used immediately after possessing it, or if Khums was applicable and he paid the Khums from the asset itself, then in these two cases Khums is not applicable on the increase in value, even if he used it for trade.
702. There is no distinction between money or other types of assets in the case of increase in the market value, so whoever has dinars or lire then changes it to another currency and its value has increased during the year to become double its original value, this increase is regarded as profit on which the previous and the following rulings apply regarding its use for trading or possession, and regarding paying off losses or not and other rulings.
Second: Excluded maintenance
Having explained the profits on which Khums is applicable, we should explain the maintenance that is excluded from the Khums in the profit year.
703. We mean by maintenance/ that which falls into the following two categories:
First: All money which is spent in the pursuit of gaining a profit, such as maintenance, fuel etc that the work machinery needs; also the costs of transport, accountancy, security spent in the workplace; also shop rental, taxes etc.
Second: All money spent for his year’s maintenance that relates to the living expenses of the individual, his family, guests, his acts of worship and other things suitable to his status, whether in the expenditure is obligatory, recommended, recommended to abstain from or freely allowed.
704. The exclusion from the year’s maintenance is conditional that the money was actually spent and part of the profits were used for it, so there is no exclusion for any amount that he estimates to be donated to him or for what he saved by economising on his expenses so that it becomes excluded from the Khums at the end of the year.
It must be noted that actual expenditure has not taken place if he issues a cheque to be cashed before the Khums new year and cashing it is delayed until his new year arrived, because in this case he must pay the Khums on the amount that remains with him, since issuing the cheque does not take the money out of his possession.
705. What is spent on forbidden things, including what can be regarded as wasteful spending (isrāf, tebthĪr), is not regarded as part of the maintenance, therefore he has to estimate what he spent (in this way) and pay Khums on it.
706. It is not sufficient for the Khums of money or assets which are in his possession not to be applicable on the basis of the mere need for them, but, in addition to the need, he must be practising this need by usage during the year – so if he bought clothing that he needed but he did not use, he must pay Khums on it since by not using it it had become part of the maintenance surplus. That said, two things are excluded from this:
a- The person is not able to achieve the need except gradually, such as in building a house, bride’s preparations, buying a house in monthly instalments that take years to complete; here the parts of that particular need which he is actually paying during the year are regarded as part of the excluded maintenance even though he could not use that need in that year.
b- What is an actual need but the usage of which is subject to emergencies, such as furniture prepared for guests when it is possible that not a single guest would come to use it during the year, or books that the student usually needs but it happens that he did not need them during that year, or winter clothes that he bought after the season and his new year arrived without him using them. The rule in this exception is: As long as the nature of the need may stretch longer than one year or is bigger than the ability of the person to achieve from the profits of one year, usage is not a condition to regard it as excluded maintenance for that year.
707. A person may borrow to cover the expenses that he needs for his maintenance, such as for medical treatment, buying a car etc, here there are two situations:
a- That he pays back his debt during the same year, in which case the debt is regarded as part of his maintenance, thus is excluded from the Khums, regardless to whether the debt is from the Khums year or from previous years.
b- That he does not pay the debt back during the same year, leaving himself owing it until the end of the year but with his firm decision to pay it back from his profits in that year; here there are two cases:
1- That the debt was for maintenance during the profit year; in this case it is excluded and an amount equals the debt is to be excluded from the Khums even if that amount was not spent to pay back the debt.
2- That the debt is from previous years; in this case what equals it is not excluded if he did not pay it to the person whom he owed before the arrival of the (Khums) new year.
708. Khums may become payable on the profits of the year, but he does not pay, so this Khums becomes a debt; in this case, if he wanted to pay the Khums from the profits of the following year, or after that, there are two possibilities:
First: The asset on which the Khums became payable still exists, such as the house, car, land etc, in which case he has – in addition to the Khums – to pay the Khums of this Khums which he is going to pay, making the total of what he must pay approximately a quarter.
Second: The asset on which the Khums became payable had perished after the elapse of the profit year, in which case he must pay the Khums only.
709. Things which stay with (despite) usage, such as clothes and jewellery, are excluded from the Khums as long as they are needed through the years; and if a person does not need them any more, such as a house that he moves out of completely to go to another one, Khums becomes payable on them as long as the Khums on them was not paid before.
710. What is meant by ‘new year’ is the elapse of one year from the beginning of achieving a profit by the person’s production and earning, whether he is going to make this as a new year for maintenance or trading/business. Specifying the new year is not subject to the intention of the person because it is an external matter that relates to the beginning of profits; however the person can interfere and specify another day instead, but, he, then, has to pay Khums of his profits that were achieved between the beginning of the natural new year (when the profits started) and the day which he specified; then he can follow the day which he specified in the following years; and so on every time he wants to change his new year.
The person is free to follow either the Hijri or the Roman calendar.
711. The benefit of specifying a new year lies in that the person, to pay the Khums, waits for the arrival of the second new year to see the amount he spent on his maintenance and pays Khums on the surplus from the maintenance, rendering this taxed money as a capital, the surplus of which is to be taxed in the following year, and so on.
712. The person must specify one new year, so it is not allowed that an employee who is paid monthly salaries to specify one new year for every salary, i.e. to wait the elapse of one year on every salary payment, but he must observe one new year for all as we have explained above.
713. If the person pays money as Khums, then he needs it in the following year for some of his expenses, it is allowed for him to compensate what he spent from the profits of the current year when its new year arrives.

(C) The Khums of business capital
What is meant by business capital is everything that is related to the trading process, including the means used to make the profit such as tools or shops, even the money paid as kholow/sarqofliyyah (i.e. an amount of money paid once at the beginning of the rental of a shop etc that is additional to the rent, as if to allow the premises to become vacant), also the assets used for business, whether money or goods. The details of this are as follows:
714. Khums is applicable on business capital whatever its type, except the following:
1- Money taken from money that was taxed (Khums paid) before.
2- Money taken from money that is not Khums-applicable, such as inheritance and khol‘ divorce compensation.
3- Money that is equal to, or less than, a person's annual expenditure so that he has no other money, nor is he capable of producing what meets part of his annual expenditure through an employment or the like.
715. It is not obligatory to hasten to pay Khums on business capital at the start of using it in business, but it is allowed to wait the elapse of one year after that, then tax it as the Khums at the new year, unless Khums is applicable on it for other reasons.
716. It is not obligatory to tax the Khums on business profit as soon as it is achieved, but a person can wait until his new year to pay Khums on the surplus from what he spent on his maintenance and business needs, such as workers' wages, fuel, taxes etc. For example: someone produced twenty thousand, spent eight thousand for his needs and four thousand in the production process is obliged to pay Khums on the remaining eight.
That said, if he made some of his profit a capital for another business, such as if he bought shares in a company, in this case the previously explained business capital that must be taxed as Khums would apply, and would not be excluded from the profit.
717. The exclusion of production costs is not exclusive to businesses which see their profits in the year of the expenditure, so if a person spent in this year a profit that would not be achieved until the following year or the year that follows, in this case it is acceptable to exclude it until the profit is achieved after one, two years or more.
718. Every loss that takes place in the capital can be compensated from the profits achieved at the end of the year, regardless of whether the loss was due to tools or machinery damage, raw materials or workers and the loss due to tool or machinery depreciation because of use or spending some of the capital to meet a person's needs, and whether the loss was before he made any profit in this year or after he made the profit. For example: if someone buys goods for fifty thousand and some are stolen to the value of ten thousand, but he makes twenty thousand profit, in this case he, at the end of the year, can compensate the loss from the profit by returning his capital to fifty thousand and pay Khums on the excess to his compensated capital, ten thousands in this example.
719. The ruling in crops and livestock is the same as the ruling in other assets, whether regarding the maintenance or business, which we explain as follows:
a- If the trading is with the same livestock and farm, for example, in this case it must be taxed for Khums as a business capital, and its profits must be taxed Khums as well, including the increase in market value if some of it remained unsold at the end of the year.
b- If the trading is with the produce of the livestock and the fruit and produce of the farm, in this case he must pay Khums on the business capital, which is the livestock and farm, for example, which is given the term ‘ossūl’, i.e. original assets, as we mentioned before, in addition to paying Khums on the profits without exclusion of the production costs, but Khums is not applicable on the increase in the value of the original assets as long as his intention is trading with the growth not the original assets.
720. If he has business capital – wholly or partly – as a loan with a merchant, it is regarded as if it is non-existent as long as it is not paid back; so if someone has a fifty thousand capital and half of it is owned by him and half a loan to someone else, in this case his capital, in fact, is the owned half only, which is the one applicable to the Khums, not the other half which is still not paid back to him; then when each part of it is paid back to him during the following year, he must pay Khums on it according to the previous rulings.
721. If he bought something to trade with  such as work tools, depot etc  and the cost was a loan to be paid in instalments, there is no Khums payable on the increase in its market value, if any.
722. It is obligatory on a businessman to pay Khums on loan which others owe him if it is possible to get them paid back when the person demands it, otherwise he is allowed to delay paying the Khums until they are paid back to him.

(D) Estimating the Khums
723. If the conditions for Khums exist, it becomes obligatory on the person to pay the Khums at its specified time without delay, but since the external elements in the Khums differ according to whether the asset is money or goods, and according to their purpose being for business or possession, and according to whether a person owns them as money or a loan, the estimation and calculation of the Khums differs for the three different cases:
First: If the asset to be taxed for the Khums is money or assets (other than money) and the person wants to pay the Khums from the money or the asset itself, not from something different, and here the parts of the asset are of equal value, a person may pay its Khums without any problem; but if their parts are different, it is not sufficient to pay the lower-valued part only, so he must check the difference in value and pay the amount equal to the Khums (20%) of the total from the same asset or a different one.
Second: If the person wants to pay the Khums from another asset, here he must estimate these assets at their current value and pay its Khums, even if their current value is less than the purchase cost, although it is better to pay Khums according to the purchase value. The same ruling applies to business assets.
That said, if he borrowed money and bought a car, for example, for possession, regardless to whether it was for the maintenance of his business, then he started paying it back from the profits of the following years, in this case after he had paid all the loan, and if the Khums was applicable to it, he is not obliged to pay the Khums of the increase over the purchase price paid by the money he borrowed before. However, if selling it were to make profit and its market value increased, the Khums on the increase will be obligatory.
Third: If the assets he has were bought with money from the profits of the previous year that were Khums-applicable but he did not pay the Khums, in this case he must pay Khums on the money only. So, if he bought a house using saved money which was Khums applicable, in this case, regardless to its current or past value, he must pay the Khums on the same price he paid when he bought the house, unless the house was bought to make a profit, in which case he must pay Khums on the price and pay Khums on the increase in the value, treating it as a business capital as previously explained.
724. If the person doubts whether the asset, which has been in his possession for one year, was bought using saved money so that he estimates its Khums according to the purchase price, or if it was bought it using profits of the purchase year so that he estimates its Khums according to its current value, in this case he must estimate the Khums according to its current value.

(E) Paying the Khums
725. The Khums is to be divided into six shares, as follows:
a- The state’s portion, which is three shares, that the scholars call ‘sahm al-Imam’, i.e. the Imam’s share, which in turn consists of three shares:
1- God’s share.
2- The Messenger of God’s share.
3- The Messenger relatives’ share (thol-Qorbā), who is the infallible Imam (as) in particular. In the time of occultation, these three shares are controlled by the ‘general deputy’ of the infallible Imam (as) who is the just scholar known as al-ākim ash-Shar’i (the Islamic authority).
This part of the Khums is not paid to the Messenger (sawa) or the Imam (as) in his personal capacity, but in his position and responsible capacity with expenses to meet in the way that the infallible sees appropriate. Thus, the Islamic authority/scholar notes in the expenditure of this part the priorities which the Imam (as) would be concerned with had he been present, which are different and diverse according to the circumstances and according to the scholar’s degree and spread of authority. These priorities may be listed, according to their importance, within two areas:
First: Spending it (these shares of the Khums) in propagating and strengthening Islamic teachings, such as sponsoring propagation centres and preparing scholars, and in supporting the strength and independence of the Islamic entity.
Second: Spending it on projects vital for Muslims such as schools, hospitals, science institutes and supporting the weak and poor and the institutions that care for them.
b- The individuals’ portion, which consists of three shares, known by the scholars as ‘sahm as-Sādah’, i.e. the Prophet descendants’ share, which in turn consists of three shares:
1- The poor, especially the masākin (i.e. who lead a harder life than the poor).
2- The orphans.
3- The stranded travellers (ibn as-Sabil).
These shares are exclusive to the poor, orphans and stranded travellers from the Hāshimite tree (i.e. descendants of Hāshim, the great-grandfather of the Prophet (sawa)) as an obligatory precaution.
The descriptions of the poor, orphan and the stranded traveller are the same as those mentioned in the chapter on zekāt; in addition, to qualify for the descendants' share (sahm as-Sādah), the following must be met:
First: Righteousness is not a condition, although it is an obligatory precaution not to give to someone who is not praying, who vaunts his sins and who drinks alcohol. It is also more appropriate that the person does not pay someone who does not follow Ahlul Bayt (as).
Second: It is not sufficient in the case of orphans to possess the mere state of being an orphan, but they must be poor and lacking possession of their own maintenance for the year; so if the orphan inherits money that is sufficient for at least one year, he is not entitled to Khums.
What is meant by an orphan is one who has lost his father and has not reached the Islamic legal age (bolūgh) yet.
726. If the wife is a Hāshimite and the husband not, then if her expenses are met by her husband, even if he borrows, in this case she is not entitled to the descendants’ share, But if her husband was not capable of meeting her expenses, even with borrowing, or what she needs is something that not her husband is not obliged to pay for, such as to pay a loan, in this case it is allowed to pay her from the descendants’ share and if she is given it it becomes her own so she can spend it on her children, husband or others.
727. The Hāshimite can take his share of the Khums whether the Khums payer was a Hāshimite or not.
728. It is allowed that one descendant/ Hāshimite gets given what is sufficient for one year’s maintenance and not more, and it is allowed to spread the amount being paid over the three types in whichever way a person likes; the same applies to the expenditure of the Imam’s share.
729. A person who has to pay Khums is not free to pay to entitled individuals from the descendants’ share and not free to spend it on the expenditure of the Imam’s share without obtaining the permission of the Islamic authority, who is the just mojtehid scholar or his authorised representative (wekĪl), as an obligatory precaution for the two portions; the scholar, in addition to righteousness and ijtihād, must be knowledgeable on the expenditure of the public and private religion-based money revenues in a way that conforms with the aims of the Shari’ah and the needs of society.
730. It is not obligatory to pay in the country of the payer, although it is more appropriate to do so when entitled individuals exist there. That said, if the transfer to another country, if done, is regarded as a type of complacency in meeting the obligation, such as if this (the transfer) leads to delaying the payment for a long time, in this case it is not allowed to be transferred. Also, if the Khums is present in a country other than that of the owner, he must not be complacent about paying it and must try to pay it at the earliest possible occasion.
731. If a person owes the Khums payer money and the payer wishes to pay him the Khums, he is allowed to regard the debt as Khums and he has met his Khums obligation if this takes place, with the permission of the Islamic authority as an obligatory precaution