accounting & finance

In the view of ASEAN & Asian international finance, Malaysia has always been dubbed as the Islamic finance capital – From G2G sectors (government to government) or private companies. Since the Islamic financial services sector gets a major boost in incentives and tax exemptions, the community has lauded positive responses and neighbouring countries probably has started noticing their liberal views towards tax.

But that was in 2006.

What did the govt do back then?

Back then it was Prime Minister Mr. Badawi. 10 years of income tax exemption (in some cases, it’s 5+5) for Islamic banking and Takaful companies that are dealing in foreign currencies; plus a bonus of 20% stamp duty exemption for three years.

The value did not end there. In order to spruce and excite the middle to top management, 10 years of income tax exemption was given to fund managers who manage Islamic funds for foreign investors and personal tax relief for education up to RM5,000/year for Islamic studies.

Tax deductions be given on expenses incurred in establishing an Islamic stock broking firm and issuance of Islamic products to be extended from year of assessment 2008 to 2010. (PwC)

Malaysia’s Financial Assets as Islamic Hub

According to PwC:

• Islamic banking assets: RM113.5 billion (US$30.9 billion).
• Takaful assets: RM6.2 billion (US$1.7 billion).
• Largest Islamic private debt securities (IPDS) market: 45.5% (RM125 billion or US$34 billion) of domestic corporate bonds.
• Active Islamic money market channeling about RM30 billion – RM40 billion monthly.
• Critical mass of diversified players – Islamic banks, investment banks, takaful companies, development financial institutions, savings institution, fund management companies, stock brokers and unit trusts.

While we could argue all day on whether the dense population of Indonesia (and its assets) or China (assuming there are no strict regulations) could outmatch Malaysia in any way should there be a high interest, we’ll leave it for you to figure out for yourselves.