85
Figure 4.3: Tax Incentives Accorded to Islamic Finance Based on Budget 2018
Source: PwC 2017/2018 Malaysian Tax and Business Booklet
Other supporting tax-related initiatives that have facilitated the country’s transformation into
a vibrant sukuk hub that has attracted not only domestic but also global issuers and investors
are listed below. These fiscal measures have been introduced in line with Malaysia’s aspiration
of becoming an international Islamic hub, known as the Malaysia International Islamic
Financial Centre (MIFC):
1. Promoting Malaysia as a point of origination:
 SPVs for the issuance of sukuk are not subject to the administrative tax procedures
under the Income Tax Act 1967.
 Companies that establish SPVs are given tax deductions on the cost incurred by the
SPV for the issuance of sukuk.
 The issuance cost for all Islamic securities approved by the SC is eligible for tax
deductions.
 Stamp duty is exempted for instruments relating to Islamic securities issued under
the MIFC until 2020.
2. Promoting Malaysia as an investment destination:
 No withholding tax is imposed on non-resident investors vis-à-vis the profit or
income received from FCY sukuk originated in Malaysia and approved by the SC.
 Foreign investors in Malaysia are allowed to hedge their positions with onshore
banks in relation to committed flows of funds, such as the repatriation of
investment proceeds, dividends and profits from Malaysia, and the purchase of
ringgit assets in Malaysia.
 Free inward and outward movement of funds relating to both foreign direct
investments and portfolio capital investments.