The Islamic Ruling on Goodwill

Q. Is it permissible to charge a separate value for Goodwill when selling one’s business?

A. Goodwill is an intangible asset that relates to the value of a company’s name, brand reputation, loyal customer base, excellent customer service, good employee relations, and proprietary technology. Goodwill does not have an independent value and is always associated with a business.

As a general rule of Islamic economics, it is not permissible to sell an intangible asset. An asset must be tangible for the sale of it to be valid. Therefore, it is not permissible to charge a separate value for Goodwill when selling a business apart from the tangible assets in the business.

As an alternative, the value determined as Goodwill may be added and incorporated in the actual sale value of the tangible assets of the business without charging for it separately. (Fataawa Mahmoodiyyah 16/178 – Imdaadul Ahkaam 3/453)

Allah Ta’ala Knows Best

Mufti Ismaeel Bassa

themufti.com