Tax treatment

18
Tax Treatment on
Islamic Finance 
in Malaysia
Islamic bond issuance based on Sukuk Ijarah (Leasing)
[
Source: PricewaterhouseCoopers
]
Note:
• 
Sukuk is issued based on asset being sold to the SPV who will leaseback the asset to the owner.
• 
Due to underlying disposal of asset and lease transaction, the tax issues are more complex 
compared to a conventional transaction.
Some common tax issue to consider
• 
Would the sale and lease be seen as separate sale and leaseback transactions for the purpose 
of tax?
• 
Would there be issues as far as tax depreciation is concerned on the disposal of assets (i.e. claw 
back on tax depreciation claimed previously)?
• 
Would tax incentives be affected by an Islamic financing structure due to disposal of assets?
• 
Would there be additional or double stamp duty payable as a result of the underlying asset 
transfer?
• 
Would “profits” on such Islamic Finance transactions be tax deductible?
• 
Would there be other taxes such as Value Added Tax (VAT) or Goods and Services Tax (GST)?