All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.
If the stolen property is still intact and present, then it does not belong to the person who stole it at all, and he must return it to its rightful owner. In this case, he is not required to pay Zakah on it. However, if he has already spent it, then it remains a debt he owes.
Most scholars are of the view that debts are deducted from a person's wealth on which he is obligated to pay Zakah. Accordingly, he should deduct any debts he owes, whether due to a loan, theft, or any other reason, and then pay Zakah on the remaining amount.
Furthermore, the opinion we adopt on our website is the opinion of the Maliki school of jurisprudence; if the person owns surplus assets he does not need, such as extra houses or cars, he should consider those in place of his debt, and then pay his due Zakah on his wealth. However, if he does not have any surplus assets, then he should deduct his debts directly from his available (Zakatable) wealth and pay Zakah on what remains after the deduction.
Allah knows best.