The Japanese Financial Services Agency has issued a document (see Taxation of J-Sukuk Q&A) highlighting reforms to Japanese tax laws implemented in 2011 that facilitate the issuance of sukuk by Japanese companies (J-Sukuk).
Following these reforms, distributions paid on J-Sukuk benefit from the same favourable withholding tax treatment as interest or coupons paid on corporate bonds issued by Japanese companies. In addition, if certain conditions are fulfilled, transfers and re-transfers of real estate that constitute the assets referenced in a J-Sukuk issuance will not give rise to real estate acquisition taxes and the registration of such transfers will not give rise to registration and licence taxes.
When taken together with additional reforms implemented in early April 2012 to allow J-Sukuk to be cleared through the Japan Securities Depository Centre, it seems evident that a concerted effort is being made to attract new Shari’ah compliant sources of capital to Japan. In this respect Japan joins a number of other financial centres, including the United Kingdom, Hong Kong and Singapore, in implementing legislative changes to provide a legal environment in which Islamic finance can flourish.
For more information on this topic, click here to view a news release from Islamic Finance News.
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