FURTHER INCENTIVE FOR ISLAMIC FINANCE IN MALAYSIA'S 2010 BUDGET

Malaysian Prime Minister and Finance Minister, Datuk Seri Mohd Najib Tun Abdul Razak delivering his 2010 Budget to the Dewan Rakyat (the parliament) on 23 October 2009 announced several key incentives aimed at sustaining the steady development of Islamic finance in the country through the Malaysia International Islamic Financial Centre (MIFC) initiative. These are effectively extensions of the existing regime of tax incentives which are due to expire in 2010, to 2015. The extensions apply to:

a) stamp duty exemption of 20 per cent on Islamic financing instruments;

b) tax exemption on Islamic banking and takaful companies profits derived from overseas operations; and

c) double deduction on expenditure incurred in promoting Malaysia as an international Islamic financial centre.

Similarly, the extensions apply to the Islamic capital market, which include:

a) deduction on expenditure incurred on the issuance of Islamic securities approved by the Securities Commission (SC) and by Labuan Offshore Financial Services Authority (LOFSA);

b) tax treatment accorded to Special Purpose Vehicle (SPV) established under the Companies Act 1965 and under the Offshore Companies Act 1990 electing to be taxed under the Income Tax Act 1967;

c) tax exemption on profits received from non-Ringgit Sukuk originating from Malaysia and approved by the SC and by LOFSA; and

d) deduction on expenditure incurred in the establishment of stock broking companies.

Let us see whether the initiatives can spur the growth of FDIs into the country especially from the MENA region....