Tax treatment

4
Tax Treatment on
Islamic Finance 
in Malaysia
Glossary
(continued)
Rahnu
(pawnbroking)
A possession offered as security for a debt so that the debt will be 
paid from them in case the debtor failed to pay back the debt. 
Other names: pledge, mortgage, pawn, collateral but with Shariah 
rulings.
Riba’
(Interest)
Covers any return of money on money, whether the interest is fixed 
or floating, simple or compounded and at whatever rate. Such gain 
is prohibited.
Salam
(deferred 
delivery)
A sale in which payment is made immediately while goods are 
delivered at an agreed later date. It is equivalent to an advance 
payment. It was originally created to provide financing for farmers.
Shariah
Islamic laws derived from Al-Quran and As-Sunnah.
Special Purpose 
Vehicles (SPV)
A separate subsidiary company set up to contain investments. Such 
a company protects its assets secure if the parent company goes 
bankrupt.
Sukuk
(Bond)
Financial instruments that serve much the same purpose as debt, but 
which are structured to avoid the payment of interest.
Tabarru’
Donation, gift or contribution.
Takaful
(Insurance)
An arrangement under which participants agree to contribute to a 
fund, where sums from the fund would be disbursed to participants 
or their beneficiaries on the concurrence of pre-agreed events.
Wakalah
A contract between an agent and principal. In most circumstances, 
the agent would be entitled to be paid ujrah (fee) for his services 
rendered.
Zakat
Obligatory contribution assessed based on certain assets owned by 
a Muslim that satisfy certain conditions and is to be distributed to 
specified categories of beneficiaries.

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