Tax treatment

Tax Neutrality
No Tax Neutrality
Tax Neutrality
Disposal of assets/ properties may 
be subject to income tax or capital 
gains tax.
Underlying disposal of the assets/ properties required for 
Islamic transactions will be disregarded for income tax 
purposes. In this regard, no additional tax impact on the 
sale and leaseback required in Islamic transactions.
Double stamp duty for the sale and 
leaseback of assets/ properties.
Stamp duty exemption on the underlying sale and 
disposal of assets/ properties will mean that no 
additional stamp duty will be applicable compared to 
a conventional transaction.
Uncertainty in respect of what 
a company can take as a tax 
deduction.
Profit element will be treated as “interest” for tax 
purposes. Tax deductibility on expenses incurred 
available so long as tests of tax deductibility has been 
met.
[
Source: PricewaterhouseCoopers
]
There is always a need for tax neutrality so that Islamic finance is put on equal tax treatment 
compared to conventional finance. Otherwise, Islamic finance will not be attractive or competitive 
compared to conventional finance.

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