The stranger bits of Finance Bill 2012: from cricket to Islamic finance

THE FINANCE BILL 2012 was published yesterday by Minister for Finance Michael Noonan and among the Mortgage Interest Relief measures and tax changes for businesses, the Bill also clarified the following (more unusual) elements of Irish taxation:

1. Bread

The Finance Bill 2012 clarifies the range of bread products, including bagels and blaas, which will not be liable for VAT and will instead remain designated at a zero rate of tax.

The zero-rated breads include loaves, rolls, batch bread, bagels, baps, blaas, burger buns, finger rolls, wraps, naan breads and pitta bread.

Other flour- or egg-based bakery products are subject to VAT of 13.5 per cent.

The Department of Finance said that the breads listed above are being designated zero-rated for tax in an effort to reflect the kinds of bread currently available on the market while taking into account the development of bread for health and ethnic reasons.

2. Cricket

The Finance Bill had some good news for professional cricket players: they are being added to the list of professional sportspersons entitled to tax relief on certain income.

The move also means that the cricketers will be eligible for a higher rate of relief on pension contributions.

Other sportspersons covered by this are: athletes, boxers, cyclists, golfers, motor racing drivers, footballers, rugby players, swimmers, jockeys, and tennis, squash and badminton players.

They must be resident in the state for the relevant tax assessment period to qualify and the deduction only applies to direct sports earnings (less expenses) and not for indirect income earned through promotional appearances or sponsorship.

3. Islamic Finance

The Finance Bill also includes enhancements to the tax regime for Islamic finance.

This area of finance in Ireland, which although faith-based is not limited to Muslims, was introduced in the Finance Act 2010, and refers to financial transactions which are consistent with the principles of Islamic or Sharia law.

Under Islamic finance, the payment and receipt of interest is forbidden. Speculation is also prohibited, while investment in unethical businesses, products or services is also banned. According to the Revenue Commissioners, under Islamic finance, transactions are typically backed by or based on an identifiable and tangible underlying asset.

The transactions also involve sharing risk between the investor and the investee, and products under Islamic finance operate along the same lines as conventional financial products by using familiar legal structures in an alternative way to achieve the financing objectives.

The Finance Bill published yesterday proposes technical changes to certain Islamic financial transactions in the same way as conventional financial transactions by allowing such a company to have other income in addition to income from leasing and/or income from specified financial transactions.

source : the journal.ie

Luxembourg Government announces a series of supportive measures for Islamic finance in Luxembourg

1ec7c846dd45d2beAt the Islamic finance conference held in Luxembourg on 5 and 6 May, Fernand Grulms, CEO of Luxembourg for Finance, passed on four messages from the Government. Speaking to a maximum capacity audience that included Islamic scholars and Islamic finance experts from Europe, the Middle East and Asia, Mr Grulms identified Islamic finance as a concept that is not limited to the Arab world but which has values in common with the socially responsible investment principles that are gaining popularity in western countries. In the “dense fog” that surrounds the immediate future of the financial sector, ethical and moral standards for investing “will inspire our actions of today and tomorrow”.Mr Grulms passed on four messages from the Minister of the Treasury and Budget, Luc Frieden:

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.

Source: abbl