Question

If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period.

The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year. Why? Explain with example.

For every kind of money or activity there is a rule for calculating alms which are due on it. Some are calculated in relation to the total amount and others are calculated in relation to the net amount. Give two examples for each where alms are calculated on total amounts and where alms on calculated on net amounts.                  

Receptacle of Alms money calculated by subtracting liabilities which are due to be paid at that moment from alms assets. Assets which meet the conditions of obligatory alms are called Alms Assets. State the conditions of obligatory alms.

Answer 1

Part A

As per Chapter 6, Tax Accounting Rules of Article 22,

If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period.

The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year unless it is stipulated to be a long fiscal year in accordance with Companies Law.

Further, as per Article 60: Declarations,  A taxpayer who ceases business activity is required to notify the Department and to present, within sixty days from the cessation date, a tax declaration for the short taxable period ending with the date on which it ceases business.

Thus, for example, if a person is closing his business in July 30, he need to mention the aurhorities about the same and file his return for the period Jan to July within 60 days frin July 30.

Part B

Net Amount: Revenue from business and return from investment

Total Amount: Cash money and cattle

Part C

Zakat is obligatory when a certain amount of money, called the nisab is reached or exceeded. Zakat is not obligatory if the amount owned is less than this nisab. The nisab (or minimum amount) of gold and golden currency is 20 mithqal, approximately 85 grams of pure gold. One mithqal is approximately 4.25 grams. The nisab of silver and silver currency is 200 dirhams, which is approximately 595 grams of pure silver. The nisab of other kinds of money and currency is to be scaled to that of gold; the nisab of money is equivalent to the price of 85 grams of 999-type (pure) gold, on the day in which Zakat is paid.

Zakat is obligatory after the money has been in the control of its owner for the span of one lunar year. Then the owner needs to pay 2.5% (or 1/40) of the money as Zakat. (A lunar year is approximately 355 days). The owner should deduct any amount of money he or she borrowed from others; then check if the rest reaches the necessary nisab, then pays Zakat for it.

If the owner had enough money to satisfy the nisab at the beginning of the year, but his wealth in any form increased, the owner needs to add the increase to the nisab amount owned at the beginning of the year, then pay Zakat, 2.5%, of the total at the end of the lunar year. There are minor differences between fiqh school on how this is to be calculated. Each Muslim calculates his or her own Zakat individually. For most purposes, this involves the payment each year of two and a half percent of one's capital.