Mufti for Federal Territories issues Fatwa on the payment of Zakat for digital assets

Following the 134th meeting of the Federal Territory Syarak Law Consultative Committee on 26 and 27 October 2021, the Mufti for the Federal Territories issued a fatwa on 26 October 2022 that was gazetted on 14 November 2022 under P.U.(B) 551/2022, ruling that the law on the mandatory payment of zakat (i.e. tax) on a digital asset, is as follows:
  i.     Any digital asset that is Syariah compliant, possesses value and is tradeable should be subject to payment of business zakat at a rate of 2.5%; and
  ii.    For the purposes of this fatwa, a digital asset which exceeds nisab (i.e. the minimum amount of wealth a Muslim musthave) and has been maintained for a period of 1 year shall be subject to zakat.
Zakat is an obligation for all Muslims who meet the necessary requirements to donate a fraction of their wealth to charitable causes on a yearly basis. Zakat is paid as Muslims believe that it purifies their yearly earnings which are over and above what is necessary for their basic needs. In this modern era, where digital assets like Bitcoin, Ethereum and other cryptocurrencies are becoming an increasingly popular and significant source of wealth, this fatwa by the Mufti for Federal Territories is timely to ensure that Muslims in the Federal Territories are aware that they are also required to pay zakat on their digital assets.
Alert by Muhammad Suhaib b. Mohamed Ibrahim (Senior Associate) of the Dispute Resolution Practice of Skrine.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact