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UK
The UK is one of a few jurisdictions to have accommodated Islamic finance transactions through legislation, with the Finance Acts in 2005 and 2007 introducing provisions for the tax treatment of products conforming to Sharia law. Below we highlight relevant items in the ICAEW Library print collection, followed by useful links to online articles, guides and other publications.
Articles and books in the ICAEW Library collection
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Guidance
International
Islamic Finance News: IFN Annual Guide
This annual IFN journal guide looks at overall markets for Islamic finance, including individual market reports for several countries, some of which refer to tax incentives in operation.
Australia
The release of the Johnson Report in 2009 recommended that the impediments to Islamic finance transactions in Australia should be removed, asking the Board of Taxation to consider whether any legislation needed to be amended.
A summary of the Australian government's response to the Johnson report is available on the Board of Taxation website: Review of the Taxation Treatment of Islamic Finance Products. The Board initially released a discussion paper designed to facilitate stakeholder consultation - Review of the taxation treatment of Islamic finance in Australia (October 2010) - this reviewed the tax treatment of Islamic finance in Australia, with a look at the different approaches taken in the UK, Ireland, South Korea, France, Singapore, Malaysia and Indonesia.
In the 2016-17 Budget the government announced further changes to the tax laws to give asset-backed financing arrangements tax treatment consistent with conventional financing structures. These changes will apply from 1 July 2018. The changes pledged in the 2016-17 Budget are explained in Norton Rose Fulbright's 2016 article, Changes announced to support Islamic financing in Australia and in a December 2016 article for Islamic Finance News by Asad Anari, Australia awaits tax reforms for Islamic finance.
Canada
Toronto Financial Services Alliance (TFSA) and Thomson Reuters have published a Canada Islamic Finance Outlook 2016 report which looks at the potential for Islamic finance to develop in Canada. Taxation issues are discussed briefly in Chapter 3.
France
France has instituted a number of measures to attract Islamic funds in an effort to compete with the UK. These include rulings in February 2009 (Bulletin 7E/09) to clarify the tax regime for murabaha sales contracts and sukuk financial instruments.
Jean-Baptiste Santelli and Racha Wylde from law firm De Gaulle Fleurance & Associés cover the tax treatment of some Islamic finance transactions in France in an October 2020 article, Q&A: Islamic finance contracting concepts in France.
Republic of Ireland
The Specified Financial Transactions section of the Taxes Consolidation Act 1997 (as amended by subsequent Acts up to and including the Finance Act 2016) provides a regime to tax certain Islamic financial transactions in the same way as conventional financial transactions. The Part 8A: Specified financial transactions guidance notes provide additional guidance on interpreting the legislation.
The Irish tax Revenue has issued a Tax and Duty Manual on the tax treatment of Islamic financial transactions (reviewed October 2022). The guidelines in the manual do not introduce any new provisions for Islamic finance, but provide greater clarity on the tax treatment of Islamic finance transactions, including takaful, credit and deposit transactions and sukuk.
PWC's Tax Facts 2023 provides a quick overview (p.29) of how Irish tax law facilitates most Islamic finance transactions.
Turkey
Turkey introduced tax concessions for all types of sukuk structures in August 2016 as part of its Law for Improvement of the Investment Environment (the 'Omnibus Bill'). White & Case LLP's 2016 article The sukuk experience in Turkey (p.7) examines the regulatory reforms the Turkish government has made to encourage the Turkish sukuk market.
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