The Zakat Treatment of the End of Service Benefits Provision in the Zakat Collection Regulations Issued in 1445 AH

Abstract

abstract

This study investigates a contemporary issue related to corporate Zakat, namely, the end-of-service bonus provision; is it considered a stable debt to be treated as debt for Zakat purposes or not? The study aims to articulate the jurisprudential adaptation for the end-of-service bonus provision item and explore its Zakat status, relying on its accounting treatment according to International Financial Reporting Standards. The study adopted the comparative jurisprudential approach. The first section is dedicated to describing the end-of-service bonus provision from an accounting perspective, then the Zakat Regulation 1445's stance regarding the item is highlighted in the second section, followed by the jurisprudential adaptation of the end-of-service bonus and its provision in the third section. The fourth section presents the legal ruling. and finally, the fifth section includes the study's recommendation concerning the item. Key findings indicate that the end-of-service bonus is a fulfillment of a contractual salary; hence it is considered debt on the company. and its provision is treated as liabilities from an accounting standpoint. Therefore, it is treated for Zakat purposes as debt on the contributor, subject to the provisions of Zakat on debt, according to the method of calculating the Zakat base and jurisprudential opinion on the impact of debt. The study concluded that the Zakat Regulations have established this direction and deviated from the previous practice in the prior two regulations, which treated provisions- including this provision - as equity rights.