Zakat on a portfolio is due at a rate of 2.5% over a lunar year, once the assets reach the nisab and have remained in full ownership for a complete year. The nisab corresponds to 85 grams of fine gold under the AAOIFI standards and the Maliki, Shafi'i and Hanbali schools, and to 87.48 grams under the Hanafi school; the silver nisab, set at 595 grams, gives a markedly lower threshold, used by certain charitable organisations. Cash enters the base at its value on the due date; shares and ETFs are treated differently according to whether the securities are held for resale or for the long term, a point on which the schools differ.
For a Swiss taxpayer, the work is shorter than it looks. The tax value of securities at 31 December, published by the Federal Tax Administration, is already gathered each year for the wealth tax return and gives an established basis for the calculation. The tax and zakat remain two distinct obligations: paying one does not replace the other.
Zakat on wealth made up of gold is calculated by weight, and we have dealt with it separately in our guide to zakat on gold. An investment portfolio raises other questions: securities whose value changes every day, funds whose contents you do not hold directly, cryptocurrencies whose very nature is debated, and cash spread over several accounts. This article covers the rest of the portfolio (shares, ETFs, cryptocurrencies and cash) and explains how to put a figure on it in Swiss francs.
What is zakat due on within a portfolio?
Zakat is a compulsory annual levy on certain categories of wealth, paid to designated beneficiaries. It applies to assets held, and not to a year's income. That is the first distinction to keep in mind, because it separates zakat from the logic of an income tax. A portfolio that has earned nothing may therefore be liable to it, while a portfolio that earned a great deal but was sold before the due date may not be, at least in the same form.
So you start from an inventory rather than from a performance statement. That means listing what you hold in full ownership at a given date, then valuing it. The table below places the main categories of a portfolio in relation to that base.
| Category of assets | Treatment in the zakatable base |
|---|---|
| Cash in accounts In the base | Current accounts, savings accounts, uninvested balances held with a securities provider, whatever the currency. Valued at their amount on the due date. |
| Shares held for resale In the base | Treated as goods held for trade: the market value on the due date is used, whatever price was paid. |
| Shares held for the long term Depends on the position taken | Several treatments coexist, from the simplest, which uses the full market value, to the finer one, which retains only the zakatable share of the company's assets. The schools differ. |
| ETFs and funds Depends on the contents | What counts is what the fund holds: an equity fund follows the treatment of shares, a gold-backed fund the treatment of gold. |
| Cryptocurrencies Position to be settled | Contemporary opinions do not converge on how they should be characterised. The practical question remains that of full ownership and of value on the due date. |
| Assets not held in full ownership Outside the base | An asset you do not own outright does not meet the condition of holding, whatever value a statement may show for it. |
Gold, monetary metals and metal-backed vehicles fall under a calculation by weight, distinct from this one; it is set out in our guide to halal gold and in the article devoted to zakat on gold.
Nisab and hawl: the two conditions of liability
Two conditions must be met before any rate applies. The first is a threshold, the nisab: below it, nothing is due. The second is a duration, the hawl: the assets must have stayed in your possession for a full lunar year, and be held in full ownership.
| Nisab reference | Weight used |
|---|---|
| Gold nisab (AAOIFI standards) | 85 grams of fine gold. The reference of the AAOIFI standards and of the Maliki, Shafi'i and Hanbali schools. |
| Gold nisab (Hanafi school) | 87.48 grams of fine gold. A separate historical reference, which does not come from rounding the same figure differently. |
| Silver nisab | 595 grams of silver. A markedly lower threshold once converted, used by certain charitable organisations so that a greater number of estates becomes liable. |
The threshold is therefore defined by a weight of metal and not by an amount in francs. The weight stays the reference, and its conversion is redone at each due date, at the price of the day. For a modest portfolio, the choice between the two reference metals has consequences: on its own, it decides whether zakat is due. That choice is a religious position, and we set it out without settling it: the AAOIFI standards on one side, the practice of several collecting organisations on the other.
For an active portfolio, the hawl condition calls for a practical remark. It applies to the continuous existence of wealth reaching the threshold, and not to the individual lines that make it up: selling one position to buy another does not reset the clock. The condition is met if the whole has stayed above the nisab throughout the year.
ALG Club has no sharia board. On the points where views differ (the nisab reference, the treatment of securities held for the long term, the characterisation of cryptocurrencies), we set out the documented positions and their sources. The choice belongs to each person, settled with a qualified religious authority. What we teach is the mechanics of the calculation once that choice has been made.
Shares and ETFs: two treatments according to the intention behind holding
This point is the most discussed, and the one that calls for the most care. The distinction depends on what the holder expects from the security, whatever its type.
First case, securities held with a view to resale. They are treated like goods held for trade: their market value on the due date enters the base in full. The purchase price plays no part at any stage: it does not raise the base after a loss, nor lower it after a rise. This treatment is the simplest to apply, and also the heaviest financially.
Second case, securities held for the long term, for the share of profit they produce rather than to be resold. Here the reasoning changes: a share represents a fraction of a real company. Its machinery, its buildings and its contracts are not zakatable assets, whereas its cash, its receivables and its stock are. Some of the references conclude that only this zakatable fraction of the company's assets should be taken into account. Others keep the full market value, for the sake of simplicity and caution. This difference is long-standing and documented on both sides; it is not for ALG Club to settle it.
For an ETF, the same reasoning applies one level further up: what counts is what the fund holds. An equity fund follows the treatment of shares, a metal-backed fund the treatment of the metal, and the fund documentation states the composition to be used. One question comes first, though: a fund whose compliance has not been checked must pass that check before anything else, as explained in our guide to halal ETFs.
One last confusion to clear up: purification is not zakat. Purification removes from an income stream the non-compliant share that has slipped into it. Zakat takes a fraction of wealth held, under conditions of its own. The two operations may fall in the same year and on the same lines, but neither depends on the other.
Cryptocurrencies and cash
Cash is the simplest part of the calculation. Current accounts, savings accounts, balances awaiting investment: everything available on the due date enters the base at its nominal value, whatever the intention and whatever the currency. Foreign-currency holdings are converted into francs at the price of the day. If interest has been credited to these accounts, it first raises a question of compliance, covered in our guide to investing without riba, before the question of zakat.
Whether debts falling due may be deducted is one of the points on which the references do not agree. It is settled with a religious authority, and a spreadsheet cannot settle it for you. We mention it here so that you do not discover it at the moment of the calculation.
Cryptocurrencies call for more caution. Contemporary opinions do not converge on how they should be characterised, and it would be dishonest to present as settled something that is not. What can be said, without settling it, is that the question stays the same as for any other asset: what exactly do you own, and what is it worth on your due date? An asset held in full ownership, whose access you control and which has an observable market value, meets the material conditions of the reasoning; an asset that is locked, lent out, or of which you hold only a claim raises the same difficulty as it would anywhere else. The compliance question that comes before this one is covered in our dossier on cryptocurrencies.
Calculating your zakat in Swiss francs
This part is the most useful in practice, and it is specific to Switzerland. Calculating zakat almost always runs into the same obstacle: reconstructing the value of a portfolio at a precise date, line by line, in a single currency. A Swiss taxpayer already does that work every year, for the tax return.
Securities held by a private individual are declared at their tax value on 31 December, published in the ICTax price list of the Federal Tax Administration. That list gives, for each security, a dated value denominated in francs, established by the administration rather than by the investor. The valuation, which is the most tedious part of the work, is therefore already done by the time you fill in your tax return.
The method that follows from this has four steps. First, take the inventory of securities and cash as it appears in the tax return, and add what does not appear there in that form, such as holdings in cryptocurrencies. Next, set aside the assets that do not meet the condition of full ownership, and apply to the shares the treatment chosen according to the intention behind holding them. Third step: compare the total with the nisab, converted at the price on the due date. Finally, apply the rate, if the threshold is reached and the hawl is complete.
That leaves the question of the rate, which depends on that fixed due date. The rate of zakat is 2.5% over a lunar year. A lunar year is shorter than a solar year: with a fixed due date at 31 December, the period covered is about ten days longer each year. The National Zakat Foundation states an adjusted rate of 2.577% to represent the same annual volume on a solar basis. Both approaches can be defended. Keeping the civil calendar for its convenience while applying the lunar rate for its lower amount is not consistent, however.
Zakat and wealth tax: two distinct obligations
The two exercises look alike, which feeds a confusion worth clearing up. Wealth tax is a tax, owed to a public authority according to a scale and a calendar fixed by law. Zakat is an act of worship, owed to designated beneficiaries, according to a threshold, a duration and a rate that do not come from Swiss law. Paying the tax does not replace zakat, and neither amount is deducted from the other.
What the two exercises have in common is a piece of data. The tax value at 31 December is neutral information, produced once and usable for both calculations. Seen that way, it avoids two mistakes: believing that Swiss tax stands in for zakat, or redoing from scratch a valuation that has already been completed.
Two practical differences remain. The due dates do not coincide, one being fixed and the other sliding by about ten days each year. The scopes do not overlap either: certain assets enter the zakatable base without being treated in the same way by tax law, and the other way round. Keeping an annual record of both, on a single page, saves redoing the whole reasoning the following year. To place this exercise within the wider framework, our guide to the principles of Islamic finance takes the logic from the beginning.
The most common mistakes
Recurring errors rarely come from the arithmetic itself. They come from the base used, from the calendar, or from a confusion between two neighbouring operations.
Calculating on the purchase price
This is the most frequent error on a portfolio. Zakat is based on the value of what you hold on the due date. A security bought five years ago is valued at the price used on the day, whether that is up or down, and its acquisition price plays no part.
Confusing purification with zakat
Removing the share of non-compliant income from a dividend is purification, whereas taking 2.5% of wealth held is zakat. Both may fall in the same year on the same line of the portfolio, and one does not dispense with the other. Our purification calculator does this calculation holding by holding.
Forgetting the gap between calendars
Fixing your due date at 31 December for convenience while applying the lunar rate of 2.5% means calculating over a period longer than the one that rate corresponds to. The adjusted solar rate was established for this case.
Treating wealth tax as zakat already paid
The two obligations differ in nature and do not have the same beneficiaries. Neither is set off against the other; all they share is the valuation data.
Settling a difference between schools on your own
The treatment of securities held for the long term, the nisab reference and the characterisation of cryptocurrencies are points on which the schools and the institutions do not agree. Choosing the most convenient position without turning to a qualified authority amounts to being judge in your own case.
Waiting for the due date to discover the amount
Zakat is paid in cash, while the wealth concerned may be fully invested. If you know the order of magnitude in advance, you can set the sum aside without having to sell in a hurry. This part of the exercise is a matter of organisation rather than of the rule.
Calculating zakat on a portfolio takes a dated inventory, a settled position on the two or three points of difference and a rate, then the same operation each year. From Switzerland, half the work is already done by the time you fill in your tax return. To check beforehand the compliance of the positions that make up that portfolio, our compliance check lets you screen them yourself against the AAOIFI criteria.
This content is provided for educational purposes by ALG Club. It constitutes neither a fatwa nor a financial service within the meaning of the LSFin. ALG Club has no sharia board: on the points of difference flagged here, it is for each person to refer to a competent religious authority for their own situation.
Building zakat into your wealth
The basis of assessment, the zakatable share of a fund or a share, the reference date: a halal investment expert goes through these with you and helps you anticipate the cash needed each year. The first conversation carries no obligation.
Speak to an expertThis content is provided for educational purposes and does not constitute a fatwa: as questions of compliance involve differences between schools of jurisprudence, it is for each person to refer to a competent religious authority for their own situation. Nor does it constitute a recommendation to buy or sell.