Tax treatment

8
Tax Treatment on
Islamic Finance 
in Malaysia
CONVENTIONAL 
SHARIAH-COMPLIANT
Types:
1. Operating lease
• 
In an Ijarah agreement, a bank 
or financier buys a property for a 
customer and then leases it to him 
over a specified period, thus earning 
profits to the bank by charging 
rentals. The duration of the lease 
and the fee are set in advance.
2. Al-Ijarah-Thumma Al-Bai (AITAB) or Ijarah 
Muntahia Bittamleek (IMB) [ similar to a 
hire-purchase contract in conventional 
finance]
• 
Al-Ijarah-Thummal Al-Bai (AITAB)
AITAB is an arrangement to transfer 
the ownership of the underlying 
asset by or at the end of the lease is 
by means of a sale; also called ijara 
wa iqtina, in other word is a lease 
that ends with a sale.
• 
Ijarah Muntahia Bittamleek (IMB)
In IMB, the lessor has four options 
to transfer the legal title of the 
assets to the lessee whether as a 
gift, for a token of consideration, 
consideration prior to end of lease 
termor through gradual transfer; in 
other word is a lease that ends with 
ownership transferred.
* 
Note
: AITAB is more popular in 
South-East Asia while IMB is more 
accepted in the Middle East.