If I buy a car from auction and then sell it to a private owner, how do I calculate a zakat on it? For example, if I buy a car for $1500 and then sell it for $2300, how much zakat do I need to pay?
بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم
In the Name of Allah, the Most Gracious, the Most Merciful.
A person only has to pay zakat on the zakatable assets that he owns on his zakat anniversary.[i] Zakatable assets are: money, gold, silver and merchandise. Whatever a person buys with the intention of selling (such as a car) is merchandise.[ii] Based on this, the answer to your question is as follows:
On your zakat anniversary, if you still own the car that you bought with the intention of selling (i.e. you haven't sold it yet) then you must pay 2.5% of the amount the car can be sold for. For example, if the model, mileage and condition etc. of the car is such that it can be sold for $2,300 then you have to pay 2.5% of $2,300 in zakat. If it can be sold for $3,000, then you must pay 2.5% of $3,000 in zakat. From this explanation it is clear that the amount you bought the car for is irrelevant.
If, on the other hand, on your zakat anniversary you do not own the car (because you already sold it, for example) then you do not have to pay zakat on it. As mentioned above, you will only have to pay zakat on the money, gold, silver and merchandise that you own on your zakat anniversary.
And Allah Ta'ala knows best
Mufti Faizal Riza
[i] A person's "zakat anniversary" is that day of the year according to the Arabic (Hijri) calendar in which he first became the owner of nisab after becoming mature (i.e. after reaching the age of puberty). (Nisab is the value of 612.35 grams of silver). For example, if the first time you became the owner of nisab was on the 20th of Sha'ban, then your "zakat anniversary" will be the 20th of Sha'ban every year.
[ii] If someone bought an item with the intention of personal use or to gift it to someone etc. but later on he decided to sell it, it will not be considered merchandise. For an item to be considered merchandise, it must be bought with the intention of selling.
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