What is the Zakat liability on a director’s loan into their company?
The question, as received
If I have put a director’s loan into my company, do I have to still pay zakat on that loan?
The answer
Loan receivables are Zakatable assets. Although Zakat is not payable immediately before receiving it, you can still pay Zakat on the outstanding amount each year. However, if you decide not to pay at the current time, it will be necessary to pay Zakat on the loan upon receipt for each outstanding year.
In short: Zakat is due on the loan, yearly or for all years on receipt.
Explanation
In respect to your company’s Zakat calculation, the loan will be treated as a current liability and deductible from your gross Zakatable assets value.
And Allah knows best.
Mufti Faraz Adam
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.