Purification (tatheer): principle, calculation, where to give it

You hold shares in a company classified as halal with purification required. Your broker pays you a dividend of €200. How much must you give, and to whom? This is precisely what HalalStack calculates automatically.

The principle: tatheer, not sadaqa

Purification (tatheer, literally "cleansing") is a legal mechanism distinct from voluntary almsgiving (sadaqa). This distinction is fundamental.

When a company derives a fraction of its revenue from non-compliant sources — interest on its treasury investments, conventional subsidiaries, incidental haram income — these revenues proportionally "contaminate" the dividends paid to shareholders. The principle in fiqh: you cannot benefit from a gain that partly stems from an illicit source.

Purification consists of extracting this fraction and giving it back to charitable causes, without any intention of spiritual reward. This point is crucial: it is not generosity, but ridding yourself of a gain that does not morally belong to you. You do not expect hasanat (rewards) for this act — it is an obligation of restitution, not a donation.

The Hanafi position here is identical to the majority view: the obligation exists as soon as the non-compliant income is established and calculable.

The formula applied by HalalStack

The formula follows the AAOIFI SS21 standard, purification section:

Amount to purify = Gross dividend received × (Non-compliant revenue / Total revenue)

The ratio "non-compliant revenue / total revenue" is the same as the one used during screening (5% threshold). It is recalculated each year based on the published annual financial reports.

Worked example with a fictional company:

[FICTIONAL EXAMPLE — Company "GlobalTech SA", non-real ticker, data invented for educational purposes]

Non-compliant revenue (interest on treasury investments): €4M
Total revenue: €100M
Purification ratio: 4 / 100 = 4%
Gross dividend received by the investor: €500
Amount to purify: €500 × 4% = €20

These €20 must be given to a charitable cause. You keep the remaining €480.

HalalStack stores this purification percentage in the sharia_screenings table (column purification_pct) and recalculates it automatically at each quarterly update of the financial data.

What does purification apply to?

Purification concerns the dividends paid in cash. It does not apply to:

Capital gains realized when selling shares (scholars are mostly of the view that the capital gain reflects the overall value of the company, not solely its non-compliant revenue — position of Mufti Faraz Adam, 2022).
Stock dividends, unless you resell them in cash within the same period.
Interest credited to a current account (this should not be received at all if possible — a separate question).

Some scholars extend purification to capital gains. This is a stricter position, not adopted by HalalStack by default, but configurable on request. If you follow the Hanbali school or a scholar holding such a view, take note of this divergence.

Where to give the purified funds?

Purified funds must go to legitimate beneficiaries according to fiqh. Two conditions:

The recipient must be a public-interest or charitable cause: humanitarian associations, organizations supporting the needy, education projects, etc.
You cannot benefit yourself from this donation, nor give it to your immediate relatives (dependent family). That would indirectly reclaim what you were supposed to give back.

Some Hanafi scholars allow giving to general causes (not necessarily Islamic) as long as they fulfill a social function. The position adopted by HalalStack follows this broad view.

HalalStack offers in the interface a list of verified partner NGOs. You may also choose any cause of your own that meets the criteria above.

How HalalStack calculates and tracks this for you

The flow is fully automated:

Your broker reports a dividend received (via API or manual entry).
HalalStack retrieves the purification_pct in effect for that security on the dividend date.
The amount to purify is calculated and recorded in your purification_log with the status pending.
You receive a notification: "You have €X to purify on [security]."
You give to the NGO of your choice and mark the line as donated in the app.
The history is kept with the date, the amount, and the beneficiary.

Worked example with a real asset:

[FICTIONAL EXAMPLE — the figures below are INVENTED for educational purposes, not drawn from real data]

Suppose "TechFirm SA" shows a purification rate of 2.3% this year. You receive €300 in gross dividends. Amount to purify: 300 × 2.3% = €6.90. This amount appears in your HalalStack dashboard with a "Purify" button that redirects you to a pre-filled donation page.

What this article does not do

This article explains the mechanics of purification as applied by HalalStack according to the AAOIFI SS21 methodology. It does not constitute a fatwa, does not cover all atypical cases (subscription rights, spin-offs, exceptional dividends), and does not take into account your personal school of law if it diverges from the majority position presented here. In case of doubt, consult a qualified scholar or an AAOIFI CSAA certified advisor.

Sources:

This article is for educational purposes only. It describes the purification methodology automated by HalalStack and does not constitute a fatwa, nor a personalized legal-religious opinion. Purification rates change with companies' financial data. Consult a qualified scholar for any decision pertaining to your personal religious practice.