Government offers tax-free asset transfer for Sukuk investors

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The government has proposed a tax exemption on capital gains tax applicable at the time of transfer of ownership to a trust or special purpose vehicle in an effort to popularize the Sharia-compliant Islamic bond.

Finance Minister AHM Mustafa Kamal on Thursday proposed the exemption in the budget submitted to parliament for the 2021-2022 fiscal year.

Currently, a 4 percent gains tax is applicable to the transfer of assets to SPV.

The minister said in the budget speech: “This will facilitate long-term capital raising and reduce bank dependency.”

“The facility will also give a boost to economic activities by developing the bond market, which in turn is expected to have a positive impact on the development and growth of infrastructure and capital-intensive industries,” he said. declared.

Sukuk is a true asset backed security and the issuing company will recover the asset after the term of the bond expires.

Sukuk is structured to generate returns for investors. It is issued and traded in accordance with the principles of Sharia law, which prohibits “riba” or interest.

When a person invests in sukuk, their money is put into the assets of a project or investment in order to generate profit. Sukuk holders will receive a certificate from the issuer as proof of ownership and are entitled to receive periodic payments of profits on the principal amount invested.

At maturity, the sukuk holder will recover the principal amount of the investment.

Bangladesh Export Import Company Limited (Beximco), which filed an application to issue the country’s first private sector sukuk valued at Tk 3,000 crore, also called on the National Revenue Council to waive the income tax. gains on asset transfer.

A few other initiatives will soon be taken to make the stock market profitable and in step with the times, Mustafa Kamal said in the budget speech.

Some of them include the introduction of government treasury bonds into the capital market, the introduction of various modern capital market instruments including Sukuk, derivatives, options, the introduction of the table OTC display, the introduction of ETFs and the listing of open-ended mutual funds, he said. .

In addition, in the budget, the government proposed a corporate tax rate for listed companies other than telecommunications and financial companies at 22.5 percent in fiscal year 22, compared with 25 percent in fiscal year 22. last year.

“The appropriate policy has comforted the taxpayers and has also generated positive investments and jobs in the country,” he said.

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