With regard to giving zakat to a non-Muslim, Sheikh `Atiyyah Saqr, former head of Al-Azhar Fatwa Committee, states:
The majority of scholars are of the view that non-Muslims should not be given of the money of Zakah except those whose hearts are inclined to Islam, though there is a difference over whether such stipulation is still relevant or not and the permissibility of giving them of the Zakah money is hunted with controversy.
The prohibition of giving them of the Zakah money is based on the hadith of Mu`adh Ibn Jabal when he was sent by the Prophet to Yemen: “It (Zakah) is to be taken from the rich among them and given to the poor among them,”. This statement is understood to mean: the rich among the Muslims and the poor among them. (Al-Bukhari and Muslim)
Ibn Al-Mundhir says: “All people of knowledge we know are unanimous on the fact that a Dhimmi cannot be given of the Zakah on properties.”
As for Zakatul-Fitr, Abu Hanifah holds that it is allowed to give it to the Dhimmis. It is reported that `Amr Ibn Maymu and others used to give the monks of the Zakah money. But Imam Malik, Ahmad, Al-Layth and Abu Thawr say it is not allowed to give them from it. The author of Al-Bayan quotes Ibn Sirin and Az-Zuhri as saying it is permissible to give Zakah to non-Muslims.
Supporting the view of prohibition, Dr. Muzammil H. Siddiqi, former President of the Islamic Society of North America, states:
Zakah is a special charity and it should be given only to the poor and needy among Muslims. The Prophet (peace and blessings be upon him) is reported to have said: “It (Zakah) should be taken from the rich from amongst them and should be given to the poor among them.”
So, if a person gives charity to non-Muslim organizations, he is not allowed to deduct that from the amount he has to pay for the obligatory Zakah. He still has to pay full Zakah from his wealth annually according to the nisab.
However, Dr. Monzer Kahf, a prominent Muslim economist and counselor, argues:
Verse 60 of surat 9 (At-Tawbah) does not confine the category of poor and needy to Muslims. Hence, it is evident that ZAKAH MAY BE GIVEN TO MUSLIM AS WELL AS NON-MUSLIM POOR AND NEEDY. As for the payment of Zakah to non-Muslim poor and needy, I have to add that I had in mind Christians and Jews and whoever we treat similarly such as Hindus and Zoroastrians as the Prophet (peace and blessings be upon him), instructed that we should treat them like the People of the Book who live with Muslims peacefully. The permissibility is limited to this category.
In his book Fiqh Az-Zakah, Sheikh Yusuf Al-Qaradawi, states that the hadith of Mu`adh Ibn Jabal (may Allah be pleased with him) when sent to Yemen does not stand in the face of the general implication of the verses. This opinion is supported by the practice of `Umar Ibn Al-Khattab. The hadith: “It is to be taken from the rich among them and given to the poor among them,” has been interpreted to refer to the geographical area, i.e. from among the people of Yemen, though the phrase is also interpreted to refer only to Muslims. In other words, it is not a ‘text’ in this argument and Sheikh Al-Qaradawi prefers the permissibility of giving Zakah to non-Muslims.
Also, the late Sheikh Sayyed Sabiq (may Allah bless his soul) gave preference to the opinion of giving Zakatul-Fitr to non-Muslims. He states in his book, Fiqh As-Sunnah:
Az-Zuhri, Abu Hanifah, Muhammad, and Ibn Shubrumah maintain that it’s permissible to give Zakatul-Fitr to a Dhimmi, basing their argument on the following verse: “Allah allows you to show kindness and deal justly with those who did not war against you on account of religion and did not drive you out from your homes. Lo! Allah loves those who are just.” (Al-Mumtahinah: 8)=
Thus, it appears that the issue is controversial among scholars. The view of the majority is based on the general meaning of the hadith prohibiting giving Zakah to non-Muslims, while the view of other scholars revolves around the generality of the Qur’anic verse on Zakah as well as the interpretation of the hadith as referring only to some specific people.
Dr. Monzer Kahf, suggests:
Yet, having many people who qualify as poor and needy, we may resort to the following four criteria to help select between them:
1- The degree of need, a starving person must be given priority.
2- The person’s relation to the payer of Zakah: a relative is preferred over non-relative (the Prophet, peace and blessings be upon him, said: “It is Zakah and a link [to the heart of a relative].” A neighbor is also given priority.
3- The degree of religiosity of the receiver: this is within the spirit of the advice of the Prophet (peace and blessings be upon him): “And let your food not be eaten except by a pious person.”
4- Availability of other sources for a specific poor/needy.