The Obligation of Corporate Group to Pay Business Zakat in Malaysia: A Legal and Shariah Analysis

Abstract

The prominence of zakat as a philanthropy instrument in fulfilling economic and social responsibility to zakat beneficiaries has led to the emergence of views on the obligation of group of companies to pay business zakat based on its resemblance to the khultah principle and Islamic business entities alike sharikah. Nevertheless, the application of such views into the corporate group registered under the Malaysian Companies Act 2016 gives rise to both legal and Shariah implications. First, as a body corporate, the company is distinct from its members and exists only by the contemplation of law as a fictitious entity having no religion. This legal attribute contradicts the condition of zakat payer that must be a Muslim. In addition, the theory of al-dhimmah used by contemporary Islamic scholars in recognizing corporation as a juristic person is strictly confined to human beings who become the subject of Shariah rulings. Second, as the company adopts separate legal entity doctrine which makes it different from partnership under the law, khultah as a mingling property is not separated from its partners alike sharikah. A doctrinal analysis is conducted to analyse the obligation of Shariah-compliant group of companies as artificial legal entities to pay business zakat. This paper aims to ascertain whether the obligation to pay zakat based on the khultah principle could be directly applied to the conventional structure of this corporate group which adopt this doctrine and remain as artificially non-religious entities.