ID :
82234
Tue, 09/29/2009 - 09:47
Auther :
Shortlink :
https://www.oananews.org//node/82234
The shortlink copeid
S. Korea seeks to bolster Islam bond issuance through tax benefits
By Koh Byung-joon
SEOUL, Sept. 29 (Yonhap) -- South Korea said Tuesday that it seeks to grant tax
benefits to profits earned from investment in Islam bonds in a bid to encourage
local companies to issue such debts and lure Middle Eastern oil dollars.
The Ministry of Strategy and Finance said that it will push to revise a bill that
would allow holders of Islam bonds or "sukuk" to be granted the same tax
exemptions on profits as other traditional forms of bonds.
Sukuk is similar to other bonds but different in that the debt provides dividend
or lease profits to its holders, instead of interest, as Islamic law prohibits
charging or paying of interest.
Korean law, however, gives tax exemptions only to interest earned from investment
in bond markets, not dividend profits. This difference caused Korean companies to
fail to issue sukuk as investors shun the tax-carrying debts.
Under the revision that will take into effect next year if approved by
parliament, taxes will be exempted on profits earned from holdings of two major
forms of sukuk -- Ijara sukuk and Murabaha sukuk -- and the process of issuing
the Islam bonds will also be simplified in line with other traditional bonds, it
added.
"We expect the changed system would help lure money from the money-rich Middle
East countries, diversify the nation's debt-selling routes and risks, while
improving the overall borrowing conditions for local companies," the ministry
said in a statement.
Global sukuk issuance has been on a rise in recent years. Its total issuance
totaled US$300 million in 2000 but it surged to $31 billion in 2007, according to
the ministry.
Ijara and Murabaha which will receive tax benefits are two most popular Islam
bonds which gives investors interest in the form of lease fees or dividend
profits. They account for around 60 percent of the total sukuk issuance, the
ministry explained.
The ministry said that it plans to hold investor relation meetings in such
countries as Malaysia and the United Arab Emirates to promote the government
efforts to streamline sukuk-related regulations and bolster issuance of Islam
bonds by Korean companies.
kokobj@yna.co.kr
(END)
SEOUL, Sept. 29 (Yonhap) -- South Korea said Tuesday that it seeks to grant tax
benefits to profits earned from investment in Islam bonds in a bid to encourage
local companies to issue such debts and lure Middle Eastern oil dollars.
The Ministry of Strategy and Finance said that it will push to revise a bill that
would allow holders of Islam bonds or "sukuk" to be granted the same tax
exemptions on profits as other traditional forms of bonds.
Sukuk is similar to other bonds but different in that the debt provides dividend
or lease profits to its holders, instead of interest, as Islamic law prohibits
charging or paying of interest.
Korean law, however, gives tax exemptions only to interest earned from investment
in bond markets, not dividend profits. This difference caused Korean companies to
fail to issue sukuk as investors shun the tax-carrying debts.
Under the revision that will take into effect next year if approved by
parliament, taxes will be exempted on profits earned from holdings of two major
forms of sukuk -- Ijara sukuk and Murabaha sukuk -- and the process of issuing
the Islam bonds will also be simplified in line with other traditional bonds, it
added.
"We expect the changed system would help lure money from the money-rich Middle
East countries, diversify the nation's debt-selling routes and risks, while
improving the overall borrowing conditions for local companies," the ministry
said in a statement.
Global sukuk issuance has been on a rise in recent years. Its total issuance
totaled US$300 million in 2000 but it surged to $31 billion in 2007, according to
the ministry.
Ijara and Murabaha which will receive tax benefits are two most popular Islam
bonds which gives investors interest in the form of lease fees or dividend
profits. They account for around 60 percent of the total sukuk issuance, the
ministry explained.
The ministry said that it plans to hold investor relation meetings in such
countries as Malaysia and the United Arab Emirates to promote the government
efforts to streamline sukuk-related regulations and bolster issuance of Islam
bonds by Korean companies.
kokobj@yna.co.kr
(END)
