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Tax Publications

Last Updated : 14 April 2014

Cross border taxation of Islamic finance in the MENA region

Executive Summary

The Qatar Financial Centre Authority has promoted a pioneering study into the tax treatment of cross-border Islamic finance transactions within the MENA region.

The Qatar Financial Centre Authority has promoted a pioneering study into the tax treatment of cross-border Islamic finance transactions within the MENA region.

Islamic finance is of growing importance within the MENA region, but the taxation systems of almost all countries were developed in an environment of conventional finance. This can mean that Islamic finance suffers a tax burden that is not suffered by conventional finance.

The reason is that most transactions that are undertaken in Islamic finance seek to achieve economic outcomes which are similar to the economic outcomes achieved by conventional finance. However to achieve these economic outcomes the Islamic finance transactions typically require more component steps than do the equivalent conventional financial transactions.

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QFC Tax Manual (‘QTM’)

Introduction

Tax is an important consideration for international businesses and in develop ing its tax regime the Qatar Financial Centre (QFC) has taken an approach which is unique for financial centres in the region, adopting a low tax rate and a transparent, efficient administrative process. The QFC is not a tax haven, instead it has been set up as a location in which financial services companies can operate onshore in Qatar, regionally and globally.

In developing the QFC tax regime the business community was widely consulted to ensure that the regime achieved a fair balance between its fiscal objectives and the needs of licensed firms. The result is a class

leading regime which creates an internationally competitive environment, supporting and stimulating business activities. Tax within the QFC was first levied in 2010 and as the regime is p ut into practice it is expected that clarification will be required in some areas. Whilst no fundamental changes are anticipated, the regime will be developed over the coming years to continue to impose a stable, transparent and fair tax. Guidance material and practice notes will be published to aid transparency.

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Qatar Financial Centre Authority | QFCRA is the regulator for the QFC