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ii. The mukallaf as creditor

126. The businessman being a debtor or creditor makes no difference to the ruling. The money owed to him by the others is treated as part of his property, albeit not in his hands. Should the debt become payable to him, or it would be settled whenever he demands payment, he has to pay Khums on it.

If the date for paying the debt to him is some way away, or it would not be paid if he demanded payment, he is free either to pay Khums on it now or wait for the due date to pay Khums. In this case, it would be defrayed against the profits of the year it was lent, not the year it was paid.

127. Employees end of service indemnity is of two kinds:

i. It may take the form of monthly contributions deducted from the employee's wages, which is saved for him to be paid at the end of service, either through retirement or resignation. This is his own money. Khums could be put off until the actual receipt of the money.

ii. The indemnity is earned not by way of the employee's contributions. Thus, the money passing into his hands would be considered new money, in which case it should count towards the gains of the year in hand. Whatever the mukallaf spends in the way of satisfying his needs, i.e. his yearly provisions, should be deducted from the total, and Khums paid on the remainder, should he have a definite date for his financial year. If not, one year should elapse from the date he received the money.

The ruling makes no distinction between and employee working for the state or a private company.

128. Should Khums be due on the money before it was lent, and there was no way to retrieve it (i.e. bad debt), the mukallaf is responsible to pay Khums on this bad debt.

5. How should one go about assessing Khums?

Once the requirements for the payment of Khums are fulfilled, one should hasten to calculate the amount and pay it.

However, the tools adopted to assess the property and pay Khums on it vary according to the nature of the property, how it was acquired, and what it is used for. The following is a guide for the different aspects of the subject:

i. Should the property, to be Khums taxed, be currency or capital asset, there is no proplem in assessing the property and paying Khums on it, regardless whether it was used for one's personal expenses or trade.

129. If the capital assets are all of the same type, there is no problem in levying Khums on the total. For example, the Khums on one thousand pair of shoes is two hundred pares.

But, if the capital asset was of different values, such as a plot of land with differential price dictated, say, by the location. In this case, it is not sufficient to pay tax at the rate of the less valuable segment of the land to cover the price of the entire land. Indeed, if the mukallaf so wished, he may pay Khums for the value of the whole land at the top value rate. Should the choose to pay precisely the actual price, he must take into account the difference in the prices, paying the Khums on the total value fetched either in kind or the equivalent thereof.

ii. In paying Khums on capital assets, the mukallaf may resort to settling for the equivalent of their value for this reason or the other which may be characteristic of the nature of the asset. The asset may have been bought, for one's provisions, in the financial year with money from profits made in that year, yet it remained untouched till the end of the year, it must be taxed at the going rate, i.e. not the purchase price, even though its price may have gone down. That said, taxing it at the purchase price is recommended as a matter of voluntary precaution.

The same applies to capital assets, i.e. those uses for the economic activity, bought with money from the profits of the year. Whether they are used as means of production or traded in themselves, Khums has to be paid on them at the going rate, at the turn of the year of after a number of years, although they may cost less then. Having done so, the mukallaf need not worry about giving Khums on them next time round. However, as for the assets acquired for trade, on which Khums has already been paid at source, any profit made over and above their original price, Khums has to be levied on it, for it is viewed as though it is a new gain.

130. This is the case when the assets are acquired and paid for with one's money. Should they be bought on credit, to be paid back in installments from the profits of future years, the assets may become liable for Khums, as the case may be, once the whole amount of debt is paid. The rate at which the Khums is levied must be the original price, even though the going price might be higher.

This applies if the assets were acquired for one's provisions or as part of production means. If the assets are acquired to be traded in as items of merchandise, Khums should be levied on them at the going price, once the whole debt is paid, albeit at a higher rate, as has already been discussed in "Business Debt –i. Debt incurred by the mukallaf".

Suppose that the mukallaf paid his dept part from the profits of the year and part in instalments from the profits of future years. He must take these two methods of payment into account. The portion paid in cash should be taxed at its real value, whereas the portion paid for with profits made in future years at the purchase price.

iii. The capital assets which are in the hands of the mukallaf could have been paid for with money saved over the years on which Khums was due but not paid.

The subject of Khums here is the sum of money he paid for the assets, not the assets itself, regardless of whether he bought, say, the property to live in and any fixed assets bought as part of means of production. However, should his aim behind acquiring the assets to trade in it and make a profit, as in the case of the property for example, the Khums should collectd on the value of the house plus the appreciation, if any, in its price since he bought it tell the date of sale. Thus, the investments here is treated as any other capital.

131. In the chapter on "Rules governing economic activity", we have discussed that which has bearing on assessing Khums, i.e. matters relating as to how to go about assessing Khums at different levels of pricing, wholesale/retail prices, purchase/sale prices, fluctuations of price due to market forces, making up for loss, etc; the mukallafI has to observe these factors when paying Khums.

132. Douvt may arise as to whether the particular asset was bought with money saved, with more than one year in hand, or with money from the profits one has made during the year. Such doubt must be resolved by assuming that it was paid for by the latter, in which case its current value, not its purchase price, must be taken as a yardstick for the calculation or Khums.

133. The mukallaf, be he an ordinary person or a businessman, may not be in a position to determine precisely how much Khums he is owed. This could be for a raft of reasons, not least not knowing which of his property is liable for Khums and which is not. nevertheless, he is aware, albeit vaguely, that he must pay Khums.

Assessment of the amount of Khums in such a case to be referred to the Marji' to reach a settlement. Once such settlement is reached, and Khums paid, the mukallaf should be absolved of the responsibility. 'Settlement' is a juridical term which entails an agreement between the mukallaf and the Marji' restored to in problem situations whereby a specific amount of Khums is paid by the mukallaf in settlement of his Khums liability.

Contrary to what is held by some people, 'settlement' is not an easy way out for the mukallaf with a hefty Khums liability. The Marji' is not in position to let the mukallaf go lightly, especially if the latter was affluent or not compliant with legal requirements in paying his dues. Furthermore, Khums is the right of the poor; the Marji' is a guardian on that right. Should he be in a position to know the amount of Khums that should be payable by the mukallaf, he must same; if he is not a settlement, for the payment of estimated amount, should be reached so that the mukallaf is absolved of the responsibility. Indeed, the latter amount could be more than he is owed. The prime objective of the financial settlement is not making life easy for the mukallaf at the expense of salvaging an unknown right in the most efficient way.