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Framework
Incentives for Islamic Capital Market


Capital market Sectors:
Products & Services
Recipient Incentives Reference Legislation (if any)
Sukuk

 

Issuer

Tax deduction on expenses incurred for sukuk pursuant to the principle of wakalah, comprising a mixed component of debt and assets until year of assessment 2015

Income Tax (Deduction for Expenditure on Issuance of Islamic Securities) Rules 2011 – P.U. (A) 443
Issuer Tax deduction on expenses incurred for sukuk pursuant to the principles of Murabahah and Bai’ Bithaman Ajil based on tawarruq until year of assessment 2015

Income Tax (Deduction for Expenditure on Issuance of Islamic Securities) Rules 2011 – P.U. (A) 355

Issuer/ Special
Purpose
Vehicle (SPV)

As the SPV is established solely to channel funds, the SPV issuing the sukuk is exempted from income tax;

i.

Income Tax (Exemption) (No.14) Order 2007 – P.U. (A) 180

ii.

Finance Act 2007 – Amendment to the Income Tax Act 1967 – New Section 60I

Issuer/
Originator
The company that established the SPV is also given a deduction on the cost of issuance of the sukuk incurred by the SPV; i.

Income Tax (Deduction on the Cost of Issuance of The Islamic Securities) Rules 2007 – P.U. (A) 176

ii.

Finance Act 2007 – Amendment to the Income Tax Act 1967 – New Section 60I

Issuer Extension of tax deduction on expenses for sukuk issued pursuant to the principles of Musyarakah, Mudharabah, Ijarah and Istisna` until the year of assessment 2015. Income Tax (Deduction for Expenditure on Issuance of Islamic Securities) Rules 2009 – P.U. (A) 420
Investor Profit paid or credited to non-resident companies in respect of RM denominated sukuk (exclude convertible loan stock) approved by the SC is exempt from income tax; Income Tax Act 1967 – Schedule 6: Section 33A
Investor Profit paid or credited to any individual, unit trust and listed closed-end fund in respect of sukuk (exclude convertible loan stock) approved by the SC is exempt from income tax; Income Tax Act 1967 – Schedule 6: Section 35
Investor Profit paid or credited to any person in respect of non- Ringgit sukuk originating in Malaysia (exclude exchangeable loan stock) and approved by the SC is exempt from income tax; Finance Act 2007 – Amendment to the Income Tax Act 1967 – Amendment of Schedule 6: Section 33B
Issuer To ensure tax neutrality with conventional products, any additional tax or duty is exempted or given specific treatment provided that the Islamic capital market products are approved by the SC’s Shariah Advisory Council; i.

Income Tax Act 1967 – Section 2(8)

ii.

Stamp Act – Schedule 1 “General Exemptions”

Intermediaries


 

 

Income tax exemption to qualified institutions in respect of statutory income derived from regulated activity of dealing in securities and advising on corporate finance relating to arranging, underwriting and distributing non-ringgit sukuk originating from Malaysia which are issued or guaranteed by the Government or approved by the SC until the year of assessment 2014.

Income Tax (Exemption) (No. 11) Order 2011 – P.U. (A) 445
Intermediaries Income tax exemption to qualified institutions in respect of statutory income derived from regulated activity of dealing in securities relating to a business of dealing in non-ringgit sukuk originating from Malaysia which are issued or guaranteed by the Government or approved by the SC until the year of assessment 2014. Income Tax (Exemption) (No. 10) Order 2011 – P.U. (A) 444

Islamic Stockbroking Services

Stockbroking company

Establishment expenditure incurred prior to the commencement of an Islamic stock broking business are allowed to be tax deductible, subject to the company commencing its business within a period of 2 years from the date of approval from the SC. (effective for applications received by the SC until 31 December 2015).

Income Tax (Deduction on Expenditure for Establishment of an Islamic Stock Broking Business) (Amendment) Rules 2009 – P.U. (A) 401

Islamic Fund Management

 

Fund management company

2008

Local and foreign-owned companies managing Islamic funds of local investors to be given income tax exemption on all fees received from managing the funds. To be effective from year of assessment 2008 until year of assessment 2016. The funds must be approved by the SC.

 

Income Tax (Exemption) (No.6) Order 2008 – P.U. (A) 255

2007

Local and foreign-owned companies managing approved Islamic funds of foreign investors is granted income tax exemption on management fees from the year of assessment 2007 until year of assessment 2016. The funds must be approved by the SC.

Income Tax (Exemption) (No.15) Order 2007 – P.U. (A) 199
Islamic Fund Management company Islamic fund management companies are allowed to have 100% foreign ownership. -
Islamic Fund Management company Islamic fund management companies are permitted to invest 100% of assets abroad. -

Islamic Fund Management company

A sum of RM7 billion fund will be channeled by EPF to be managed by Islamic fund management companies.

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Non Resident Experts in Islamic finance

Non Resident Experts in Islamic finance

Income tax exemption to be given to income received by non-resident experts in Islamic finance. The experts have to be verified by the MIFC Secretariat.

Income Tax (Exemption) (No.3) Order 2008 – P.U. (A) 114