The Financial Services & the Treasury Bureau (FSTB) launched a consultation on 29 March 2012 on the proposed amendments to the Inland Revenue Ordinance and Stamp Duty Ordinance to promote Islamic bond, market development in Hong Kong SAR.
Secretary for Financial Services & the Treasury Professor KC Chan said the amendments seek to level the playing field for common types of Sukuk (Ijarah, Musharaka, Mudaraba and Murabaha) vis-a-vis their conventional counterparts in terms of profits tax, property tax and stamp duty liabilities.
"The legislative amendments would also help to attract sukuk issuers using our Islamic finance platform. The structuring of Sukuk often involves transfer of underlying assets and setting up of special-purpose vehicles, which may give rise to additional tax and stamp duty implications and uncertainty under the existing laws, putting Sukuk at a disadvantage when compared with conventional counterparts. Amendments are therefore necessary.
"The consultation exercise seeks to gauge market views on the proposed legislative amendments with a view to ensuring they are practicable and able to meet the latest market development needs."
The bill will be tabled in the Legislative Council in the next legislative session. The government proposes ‘to adopt a prescriptive and religion-neutral approach, in line with that adopted by other major financial markets such as the United Kingdom, as prescriptive legislative provisions without specific reference to Shariah principles would provide more certainty in implementation to market players in Hong Kong’.
Market participants and other stakeholders have been invited to email their views to the FSTB by 28 May 2012.
source: CPI Financial