France and Hong Kong encourage Islamic finance

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France and Hong Kong encourage Islamic finance

Quoted from New Horizon. (Available at:

The positive signals towards Islamic finance which emanated from the government of France in 2008 (NewHorizon, January–March 2009) have been translated into action in the form of specific changes to the tax code. The purpose of the changes is to ensure that Islamic modes of financing do not attract extra tax penalties in relation to conventional transactions. There would otherwise be a chance that an underlying asset changing hands – a necessary part of an Islamic transaction – would attract levies such as stamp duty. Because there is no requirement for an asset to change hands in a conventional transaction, such a tax would not enter consideration.

The change of the tax code has already encouraged some firms to move into France, including Islamic Finance Advisory and Assurance Services (IFAAS), which decided to relocate in expectation of the change. IFAAS is a UK-based Shari’ah-compliance advisory firm. Invest in France Agency (IFA), a group which encourages foreign direct investment into France, welcomed the move, reflecting the attractiveness of Islamic finance to markets in the West. There are between six and seven million Muslims in France, which is the largest concentration in Western Europe. A survey carried out in 2007 by the French Institute of Public Opinion (IFOP) suggested that half a million Muslims in the country would be interested in Islamic finance.

Senior officials in Hong Kong have echoed the moves taken by the French government. The secretary for the financial services and the treasury bureau of the Hong Kong government, Professor KC Chan, confirmed in a speech at the Asian Sukuk Summit, recently held in the country, that the government is finalising new tax laws. These would make sure that sukuk are treated in the same way as conventional bonds, relating to stamp duty, profits tax and property tax. Confirming Hong Kong’s interest in Islamic finance, Sam Kwok, treasurer at the Hong Kong Monetary Authority (HKMA), also suggested that Hong Kong plans to issue a sovereign sukuk when the market conditions are right.

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