International Law

Hong Kong moves towards provision of Islamic financial services

By Chris Devonshire-Ellis

Possible changes in tax law to facilitate entry of Islamic fund market

By Chris Devonshire-Ellis

HONG KONG, Jan. 16 - Hong Kong?s Financial Secretary, Joseph Tsang, yesterday committed to the development of Hong Kong as an Islamic financial centre by seeking to attract more Muslim investors. The territory has just announced it has applied to join the Islamic Financial Services board, the international body established to develop standards for Islamic finance, and was looking at ways to modify its tax laws to attract Islamic finance to Hong Kong. The comments were made at yesterday?s Hong Kong Monetary Authority Islamic Finance Seminar.

Islamic law (Shariah) prohibits interest income but does permit profit sharing, meaning that international financial investments involving Muslim countries or investments are structured to show gains as profits rather than as interest. However, in Hong Kong, interest income is tax-exempt whereas profits are taxable. It is possible the government could waive tax on income on profits earned from Islamic bonds ? a mechanism it already permits with government bonds and exchange fund debt papers. Malaysia also offers tax incentives in this manner to attract Islamic finance and to develop its Islamic financial services. (more…)

Full post as published by China Briefing Blog on January 16, 2008 (boomark / email).