The Luxembourg Government is convinced of the interesting development opportunities presented by Islamic finance. For this reason, in April 2008, Minister Frieden set up a working group bringing together the main interested parties in Islamic finance. The task of this working group is to look at potential obstacles hindering the development of Islamic finance, and ways that Islamic finance can be further developed, in Luxembourg.
The Government has asked the tax authorities to look into the characteristics of Islamic finance deals and come up with proposals to ensure tax neutrality of these transactions compared to traditional banking and financial transactions.
The Government is also examining to what extent Islamic financial products, such as Sukuk, could be used for funding purposes of the Government or entities belonging to the Government.
The Government supports the application by the Luxembourg Central Bank to become the first “non regional” associate member of the Islamic Financial Services Board, the international regulator of Islamic financial markets.