Google+ Followers

Monday, 6 February 2017

Fitch: GCC VAT a Test for Islamic Finance | Reuters

Fitch: GCC VAT a Test for Islamic Finance | Reuters:

"The plan to introduce Value Added Tax (VAT) in Gulf Cooperation Council (GCC) member states could be a key test for the region's Islamic finance industry regarding tax parity between conventional and Islamic finance transactions, Fitch Ratings says. It could affect all the main pillars of the industry: Islamic banks, Sukuk, Takaful and sharia-compliant corporates and fund managers. According to media reports last week, Saudi Arabia and Bahrain approved the implementation of VAT in the GCC; however, local implementation laws must still be agreed in each country. This paves the way for the introduction of an expected 5% VAT rate as early as the beginning of 2018, in a region with little history of taxation. Without tax neutrality or equality rules, the introduction of VAT would put Islamic finance transactions at a disadvantage to conventional transactions. In principal, Islamic finance activities should have a real economic purpose, involving services and/or asset-based or asset-backed transactions. For example, a murabaha sukuk, a simple, commonly used contract, can be summarised as the sale of an agreed asset or commodity at cost plus an agreed profit margin, which may then be financed in instalments."



'via Blog this'