Turkey and Qatar the most Sukuk-friendly jurisdictions in the MENA region (By IFN)

Turkey and Qatar the most Sukuk-friendly jurisdictions in the MENA region

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GLOBAL: A study spearheaded by leading Islamic finance experts and sponsored by the Qatar Financial Authority and US-based International Tax and Investment Center has highlighted Turkey and Qatar as the most cost-effective jurisdictions in the MENA region for Sukuk transactions. The study also highlighted the Malaysian Islamic finance tax model as the quickest and most efficient system to implement across emerging markets; based on an advance determination of the Shariah compliance of a transaction, and subsequent modification to the tax laws to allow for a level playing field with conventional transactions. The paper, 'Cross-border taxation of Islamic finance in the MENA region-Phase One' reviewed the tax treatment of the most common Islamic finance structures: commodity Murabahah, Sukuk, Salaam and Istisnah across eight MENA countries including Egypt, Jordan, Kuwait, Libya, Oman, Qatar and the Qatar Financial Center, Saudi Arabia and Turkey. The endeavor, which was led by Mohammed Amin, a renowned market expert and the ex-head of Islamic finance at PwC (UK); Salah Gueydi, senior tax advisor at the Ministry of Economy & Finance in Qatar; and Hafiz Choudhury, Tax Administration and Policy advisor at the International Tax and Investment Center, was also a collaborative effort with Ernst & Young (Qatar) and PwC (Malaysia). Ian Anderson, the chief finance and tax officer at the QFC Authority said that although Islamic finance is picking up in the MENA region, the taxation systems of almost all MENA countries are currently derived from the conventional industry; which is the main cause of the current hefty tax implications on Islamic finance transactions. Mohammed Amin, the main anchor of the project, commented: “The study shows clearly that the additional transactions required by Islamic finance to achieve economic outcomes similar to conventional finance are at risk of being subject to transfer taxes or to taxes on income or gains, and can make Islamic finance transactions prohibitively expensive. We concluded that the Malaysian system is quicker and simpler to implement for Muslim majority countries; while the United Kingdom approach, which we also reviewed, requires much more complex drafting of tax law, since no reference can be made to external Islamic finance sources, although the UK's secular approach does have the merit of keeping religion out of tax law.”