12 Jul 2013 11:19

KUALA LUMPUR, July 4 (Bernama) -- Former Chief Justice Tun Abdul Hamid Mohamad said the Federal Constitution only allowed zakat to be collected from persons professing the religion of Islam but not for companies.

He said the law does not make a company a Muslim or a non-Muslim.

"I am not challenging the ruling of the National Fatwa Committee and the Selangor Fatwa Committee. I am merely trying to understand the basis or the rationale of the ruling (the issue of zakat)," he said in his speech entitled 'Obligation of companies to pay zakat: issues arising from effects of separate legal entity' at the Malaysian Legal and Corporate Conference 2013, here today.

He said the National and Selangor Fatwa Committees fail to make a distinction between a Muslim human being and a company when they apply the obligation to pay zakat to companies.

"They assume that behind every company there are human beings (shareholders). They impute the religion of the shareholders to the company. If the shareholders are Muslims, the company is treated as a Muslim and is obliged (wajib) to pay zakat," he said.



Abdul Hamid, who is also a member of the Syariah Advisory Council, said the National Fatwa Committee is not a fatwa committee established under any law and it has no legal standing.

"Its decisions are not 'fatwas' binding on anybody. In the Federal Territories, the fatwa committee having power to issue binding fatwas is the Federal Territories Fatwa Committee established by the Administration of Islamic Law (Federal Territories) Act 1993 (“Federal Territories Fatwa Committee”).

"The Selangor Fatwa Committee is a legally constituted committee under the Administration of the Religion of Islam (State of Selangor) Enactment 2003 (Enactment No. 1 of 2003). Both the rulings are clear that a company is obliged (“wajib”) to pay zakat.

"The Selangor ruling is quite clear and consistent that the company’s obligation is to pay “on behalf” of the shareholders zakat. The ruling of the National Fatwa Committee is not so clear. The text of the ruling gives the impression that a company is obliged to pay its own zakat. However, in the reasons that follow, it suddenly uses the words “on behalf” (of the shareholders), he said.

Abdul Hamid also said when a company is established in Malaysia under the Companies Act 1965, by operation of law, it has a separate legal entity as provided by the law for “the purpose of fostering business development by allowing owners to invest in a venture without being personally liable in tort or contract law for the company.



"Thus, a shareholder or partner’s assets that are subject to recovery in a lawsuit are limited to the value of his or her ownership interest. In order to accomplish this, the law recognizes the entity as a legal person, and it is permitted to own property, enter into contracts, sue, and be sued.” The law does not make a company a Muslim or a non-Muslim, he said.

Abdul Hamid said in Malaysia, a ruling that a company is obliged to pay zakat though gazetted, is not enforceable on companies because under the constitution, a company is not a state matter.

"A company also is not within the jurisdiction of the Shariah Court and any state law imposing zakat on a company is void because under the constitution, zakat could only be made obligatory on “persons professing the religion of Islam.” Companies are not.

"It is improper for a company to use its own funds to settle the zakat of the shareholders. It is quite similar to requiring a company to use its own funds to settle the shareholders' private bills", he said.