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Islamic Finance Under Irish Law

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Abstract

Over the last decade, Irish authorities have introduced accommodative measures to clarify and legislate for Islamic finance activity under Irish law. These measures have focused on the taxation of certain Islamic finance structures and have been designed to increase the alignment of tax treatment between these Islamic finance structures and their conventional alternatives. While there remain shortcomings in the current treatment of Islamic finance under Irish law, the steps taken to date by the Irish government to accommodate Islamic finance activity are to be welcomed and they go some way towards positioning Ireland as an economy in which Islamic finance activity is encouraged. This chapter will consider some of the specifics of Irish law that are relevant to Islamic finance. It will outline the approach to accommodating Islamic finance taken by the Irish government and the applicable legislative and regulatory framework. It will then discuss the current position under Irish law of three Islamic finance products: ṣukūk; Islamic investment funds; and Islamic mortgage alternatives.

Lecturer in Law, Maynooth University, Ireland. This chapter reflects the legal position in Ireland as of February 2019.

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Notes

  1. 1.

    Department of Finance, Islamic Finance in Ireland: An Information Note, (Dublin: Department of Finance, 2010), 4.

  2. 2.

    Central Statistics Office, Religion, Central Statistics Office, Dublin, 2017, 72, available at: http://www.cso.ie/en/media/csoie/releasespublications/documents/population/2017/Chapter_8_Religion.pdf (last accessed: February 22, 2019).

  3. 3.

    Jonathan Ercanbrack, “The Regulation of Islamic Finance in the United Kingdom”, Ecclesiastical Law Journal, 13 (2011), 69, 70.

  4. 4.

    There is no single correct means of expressing Arabic terms and sounds in the Latin alphabet. Throughout this chapter, quotations and the official names of products and organisations, which contain a transliteration of Arabic terms and use of italicisation which are different from that used in this chapter, will be reproduced without adjustment.

  5. 5.

    Yusuf Talal DeLorenzo, “Introduction to Understanding Riba”, in Interest in Islamic Economics: Understanding riba, Abdulkader S. Thomas (ed.), (Oxford: Routledge, 2006), 1, 6.

  6. 6.

    Over the last 15 years, for example, the UK has introduced comprehensive reforms in this area. See generally, HM Treasury, The Development of Islamic Finance in the UK: The Government’s Perspective, (London: HM Treasury, 2008).

  7. 7.

    Irish Revenue Commissioners, Islamic Finance, Tax Briefing Issue 78, Revenue Commissioners, Dublin, October 2009, available at http://www.revenue.ie/en/tax-professionals/historic-material/tax-briefing/2009/tax-briefing-78-2009.pdf (last accessed: February 22, 2019).

  8. 8.

    Ibid.

  9. 9.

    Taxes Consolidation Act 1997 (No. 39 of 1997) (Irl.).

  10. 10.

    Stamp Duties Consolidation Act 1999 (No. 31 of 1999) (Irl.).

  11. 11.

    For more recent Irish government discussions on Islamic finance in Ireland, see Department of Finance, IFS2020: A Strategy for Ireland’s International Financial Services sector 2015–2020 (Dublin: The Stationery Office, 2015), in which it was noted that “Islamic Finance will continue to feature in the sectoral and regional strategies outlined in IFS2020”, 20.

  12. 12.

    Defined in Part 8A TCA 1997 (Irl.) as meaning a “credit transaction”, a “deposit transaction” or an “investment transaction”.

  13. 13.

    Inserted by s39 Finance Act 2010 (No. 5 of 2010) (Irl.). See also, Oireachtas, Finance Bill 2010, Explanatory Memorandum, 10, available at: https://data.oireachtas.ie/ie/oireachtas/bill/2010/9/eng/memo/b0910d-memo.pdf (last accessed: February 22, 2019).

  14. 14.

    Inserted by s137 Finance Act 2010 (Irl.).

  15. 15.

    Department of Finance, Islamic Finance in Ireland; An Information Note, op. cit., 5.

  16. 16.

    See, s267U TCA 1997 (Irl.).

  17. 17.

    Department of Finance “Publication of Finance Act”, Press Release (Dublin: Department of Finance, 2010) noting that the aim of the provisions was to increase the “attraction of Ireland for the development of Islamic finance”.

  18. 18.

    See s37 Finance Act 2012 (No. 9 of 2012) (Irl.) and s24 and s75 Finance Act 2013 (No. 8 of 2013) (Irl.).

  19. 19.

    s73 Central Bank (Supervision and Enforcement) Act 2013 (No. 26 of 2013) (Irl.) introduced an amendment to the Central Bank Act 1971 (No.24 of 1971) (Irl.) to allow banks established in non-EEA countries to open branches in Ireland. This could potentially assist with the opening of an Islamic bank in Ireland.

  20. 20.

    See, for example, Edana Richardson, “Islamic Finance Disputes in Ireland: A comparative study of dispute resolution in Islamic finance contracts” Irish Jurist 57 (2017), 35, Edana Richardson, The Integration of Islamic Finance into the Irish Legal System: Current Issues and Future Challenges, PhD Thesis, Trinity College Dublin, 2012. Edana Richardson, “The Accommodation of Islamic Finance in Ireland’s financial legislation: A Comparative Study of Wholesale Islamic Financial Products” Dublin University Law Journal, 34 (2011), 127, Edana Richardson, “Islamic Finance for Consumers in Ireland: A Comparative Study of the Position of Retail-level Islamic Finance in Ireland” Journal of Muslim Minority Affairs, 31(4) (2011), 534, Faiza Ismail, “Islamic financing in Europe: recent developments in Ireland”, The Company Lawyer 38(2) (2017), 48.

  21. 21.

    Simon O’Neill, “The Islamic finance industry in Ireland”, Islamic Finance News (December 2015), 84.

  22. 22.

    Tarek Elbay, How successful has the Irish government been in promoting Islamic finance in Ireland? An exploratory analysis of the level of awareness of Islamic finance among employees in financial services in Ireland, Master’s Thesis, National College of Ireland, 2014, Faiza Ismail, Legal uncertainties in the global IF industry as explored in the Irish context, PhD Thesis, University College Dublin, 2016 and Noorizzati Aini binti Zainal Aalam, Can Ireland become a “Centre of excellence” for Islamic finance? A study of what is needed, what has been done and what else can be done, Master’s Thesis, Dublin Business School, 2013.

  23. 23.

    Plural of sakk, Financial Conduct Authority (previously the Financial Services Authority) and HM Treasury, Consultation on the legislative framework for the regulation of alternative finance investment bonds (sukuk), December 2008, 3, available at: http://www.fsa.gov.uk/pubs/cp/sukuk.pdf (last accessed: February 22, 2019).

  24. 24.

    For consistency, this chapter refers to the Irish Stock Exchange plc as Euronext Dublin, including when referring to listings of bonds and ṣukūk certificates that occurred prior to Euronext’s acquisition of the Irish Stock Exchange plc in March 2018.

  25. 25.

    NICBM Ṣukūk Limited US$100,000,000 Trust Certificates due 2011 (the 2006 NICBM ṣukūk). Some commentators have indicated that the first ṣukūk was listed in Ireland in 2005; however, the author has found no concrete evidence of this. The 2006 NICBM ṣukūk referenced above is the earliest listed ṣukūk on Euronext Dublin that the author is aware of, see also, Gerard Scully, “Sector set for continued growth”, Finance-Magazine, 2007, available at: http://www.finance-magazine.com/supplements/abs2007/display_article.php?i=7477 (last accessed: February 22, 2019).

  26. 26.

    See, for example, Irish Stock Exchange plc (as it was then), ISE lists world’s largest ever sukuk issuance with $9bn Saudi Arabia bonds, available at: http://www.ise.ie/Media/News-and-Events/2017/ISE-lists-world-s-largest-ever-sukuk-issuance-with-$9bn-Saudi-Arabia-bonds.html (last accessed: February 22, 2019) referring to KSA Sukuk Limited Series 1 (US$4.5 billion 2.894% Trust Certificate due 2022) and Series 2 (US$4.5 billion 3.628% Trust Certificate due 2027) issued under the KSA Sukuk Limited Trust Certificate Issuance Programme.

  27. 27.

    See, for example, the Mumtalakat Sukuk Holding Company US$1,000,000,000 Multicurrency Trust Certificate Issuance Programme, which provides at 2 that, “[t]he Central Bank of Ireland only approves this Base Prospectus as meeting the requirements imposed under Irish and European Union … law pursuant to the Prospectus Directive”.

  28. 28.

    See, for example, BBG Sukuk Ltd. US$2,000,000,000 Trust Certificate Issuance Programme, which was updated on May 4, 2017. BBG Sukuk Ltd. is a Cayman Islands incorporated special purpose vehicle established by Barwa Bank Q.S.C., a bank incorporated in Qatar. The base prospectus for this programme was approved by the Central Bank of Ireland and the ṣukūk certificates issued under the programme can be listed on the official list and admitted to trading on the regulated market of Euronext Dublin.

  29. 29.

    Dillon Eustace, Shari’ah compliant securities listing on the Irish Stock Exchange, April 2017, 2, available at: http://www.dilloneustace.com/download/1/Publications/Listings/Shari-ah%20compliant%20securities%20listing%20on%20the%20ISE.pdf (last accessed: February 22, 2019).

  30. 30.

    See, for example, Dana Gas Sukuk Limited, US$425,040,000 Exchangeable Certificates due 2017 and US$425,040,000 Ordinary Certificates due 2017. Page 1 of the Listing Particulars for these ṣukūk certificates notes that “[t]he Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC”.

  31. 31.

    See, for example, Alpha Star Holding III Limited, US$500,000,000 Trust Certificates due 2022, issued on April 20, 2017.

  32. 32.

    See, for example, MAR Sukuk Limited US$1,000,000,000 Trust Certificate Issuance Programme, established on November 15, 2016.

  33. 33.

    Annex IX (Minimum Disclosure Requirements for the Debt and Derivative securities Registration Document) EU Prospectus Regulation (Commission Regulation 809/2004).

  34. 34.

    Prospectus Directive – Annex XIII (Minimum Disclosure Requirements for the Securities Note for Debt Securities with a Denomination per Unit of at Least EUR 100,000) EU Prospectus Regulation (Commission Regulation 809/2004).

  35. 35.

    Central Bank of Ireland, Address by Head of Markets Policy, Martin Moloney at the IFLC at the UCD School of Law, 14 May 2015, available at: https://www.centralbank.ie/news-media/press-releases/martin-moloney-at-iflc-at-the-ucd-school-of-law (last accessed: February 22, 2019).

  36. 36.

    Ibid.

  37. 37.

    Sukuk Funding (No.3) Limited, US$750,000,000 Trust Certificates due 2018.

  38. 38.

    CBB International Sukuk Company 5 S.P.C., US$1,000,000,000 Trust Certificates due 2024.

  39. 39.

    Saudi Electricity Global Sukuk Company 3, US$1,500,000,000, 4.00 per cent. Certificates due 2024 and US$1,000,000,000, 5.50 per cent. Certificates due 2044.

  40. 40.

    This applies to admission to trading on both the regulated and unregulated market. See, for example, Aktif Bank Sukuk Varlik Kiralama A.S. US$118,000,000 Asset-Backed Trust Certificates due 2024.

  41. 41.

    European Union (Alternative Investment Fund Managers) Regulations 2013, SI 2013/257, as amended by European Union (Alternative Investment Fund Managers) (Amendment) Regulations 2014, SI 2014/379.

  42. 42.

    Bob Penn, Unintended consequences: application of the Alternative Investment Fund Managers Directive (AIFMD) to SPVs, Allen & Overy LLP, July 15, 2013, available at: www.allenovery.com/publications/en-gb/Pages/Unintended-consequences-application-of-the-Alternative.aspx (last accessed: February 22, 2019).

  43. 43.

    Regulation 5(1) AIFM Regulations (Irl.).

  44. 44.

    Regulation 7(1) AIFM Regulations (Irl.).

  45. 45.

    Central Bank of Ireland, AIFMD Questions and Answers, 30th Edition – 4 May 2018, Question ID 1065.

  46. 46.

    As distributions in Ireland are not tax deductible for corporation tax purposes while interest payments are.

  47. 47.

    See s267N TCA 1997 (Irl.) definition of “investment certificate” (Finance Act 2010 as amended by s24 Finance Act 2013 (Irl.)).

  48. 48.

    See s267N TCA 1997 (Irl.) definition of “investment return”.

  49. 49.

    Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), Irish Revenue Commissioners, Dublin, November 2018, [1.3]. See also, Revenue, Guidance Notes on the Tax Treatment of Islamic Financial Transactions, Irish Revenue Commissioners, Dublin, October 2010, 6 (the Tax and Duty Manual (Part 08A-01-01) replicates almost exactly the content of the original Guidance Notes on Tax Treatment of Islamic Financial Transactions).

  50. 50.

    Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit., [8]; Irish Revenue Commissioners, Guidance Notes on the Tax Treatment of Islamic Financial Transactions, op. cit., 33. See s267N TCA 1997 (Irl.) definition of “qualifying company” which provides that one of the criteria for being a qualifying company is being “resident in the State”.

  51. 51.

    Defined as the Corporation Tax Acts (enactments relating to corporation tax in the TCA 1997 and in any other enactment, together with the enactments relating to income tax in the TCA 1997 and in any other enactment insofar as those enactments apply for the purposes of corporation tax) and the Income Tax Acts (enactments relating to income tax in the TCA 1997 and in any other enactment).

  52. 52.

    Emphasis added. Read in conjunction with existing provisions of the TCA 1997, this exemption would appear to apply only to those payments which “represent[] a reasonable commercial return for the use of [the] principal” (s130(2)(d)(iii)(II) TCA 1997 (Irl.)) thus ensuring that only those transactions whose economic implications are similar to conventional bonds will actually benefit from parity of treatment.

  53. 53.

    s267R TCA 1997 (Irl.).

  54. 54.

    s130(2)(d)(iii)(I) TCA 1997 (Irl.).

  55. 55.

    s267N TCA 1997 (Irl.).

  56. 56.

    s267R TCA 1997 (Irl.).

  57. 57.

    Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit.

  58. 58.

    Ibid., [8.3].

  59. 59.

    Ibid.

  60. 60.

    s85 SDCA 1999 (Irl.) exempts the issue and transfer of “loan capital” which refers to any debenture stock, bonds, or funded debt, by whatever name known, or any capital raised which is borrowed or has the character of borrowed money, whether in the form of stock or in any other form.

  61. 61.

    s5 of schedule 61 of this Finance Act 2009 (UK). The provision was reinforced by the Stamp Duty Land Tax (Alternative Finance Investment Bonds) Regulations 2010 (No. 814 of 2010) (UK) which further extended the scope of alternative finance investment bond (that is, ṣukūk) stamp duty land tax relief.

  62. 62.

    The Tax and Duty Manual (Part 08A-01-01) does note, however, that ṣukūk “have evolved such that it is not uncommon that they grant an ownership interest to the holder of the investment certificate not in the underlying assets of the qualifying company but instead in an underlying asset which is a financial liability of the counterparty that ultimately underpins the ṣukūk arrangement and its related cash flows”, Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit. [8.1].

  63. 63.

    See, for example, Saudi Electricity Global Sukuk Company 3 US$2,500,000,000 Certificates issued in two series (US$1,500,000,000 4.00 per cent. Certificates due 2024 and US$1,000,000,000 5.50 per cent. Certificates due 2044.

  64. 64.

    See, for example, HM Treasury UK Sovereign Sukuk PLC issue of £200,000,000 Certificates due 2019. Both the Royal Bank of Scotland PLC and HSBC Bank plc have previously established sharī’ah-compliant certificate programmes but have not issued listed ṣukūk certificates under these programmes. See, The Royal Bank of Scotland PLC Crescent Trust Certificates LaunchPAD Programme and the HSBC Bank plc Programme for the Issuance of Shari’ah-Compliant Certificates.

  65. 65.

    A press release published on April 5, 2018 indicated that an Irish-incorporated company issued ṣukūk certificates. However, no publicly available information on this issuance is available as at the time of writing this chapter, Matheson, News and Insights, Matheson Advises on the First Irish Issuance of a Sukuk Bond Under Irish Tax Law, April 5, 2018, https://www.matheson.com/news-and-insights/article/matheson-advises-on-the-first-irish-issuance-of-a-sukuk-bond-under-irish-ta (last accessed: February 22, 2019).

  66. 66.

    Department of Finance, IFS2020: A Strategy for Ireland’s International Financial Services sector 2015–2020, op. cit., 20.

  67. 67.

    Ibid.

  68. 68.

    Oasis Crescent Global Investment Fund (Ireland) plc, Prospectus dated April 8, 2016, 12.

  69. 69.

    European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, SI 2011/352 (Irl.). Other Islamic investment funds established and authorised in Ireland include Old Mutual Global Islamic Equity Fund, Deutsche Noor Islamic Funds plc, Mashreq-Al-Islami Arab Tigers Fund, and CIMB - Principal Islamic Asset Management (Ireland) plc (which runs the Islamic ASEAN Equity Fund and the Global Sukuk Fund).

  70. 70.

    CIMB-Principal Islamic Asset Management (Ireland) Plc, Prospectus dated September 7, 2016, 3.

  71. 71.

    CIMB, CIMB-Principal Islamic Asset Management establishes three Islamic investment funds to attract global investors, 16 January 2012, available at: www.cimb.com/en/news/news/2012/cimb-principal-islamic-asset-management-establishes-three-islamic-funds-to-attract-global-investors.html (last accessed: February 22, 2019).

  72. 72.

    Central Bank of Ireland, Address by Head of Markets Policy, Martin Moloney at the IFLC at the UCD School of Law, op. cit.

  73. 73.

    Ibid. See, for example, the prospectus for CIMB-Principal Islamic Asset Management (Ireland) Plc, which discloses the restrictions on investing in non-Islamic investments that apply to the funds established by CIMB-Principal Islamic Asset Management (Ireland) Plc [12], divestment of non-Islamic investments, [18] and details of the “Shari’ah Advisor”, [9].

  74. 74.

    Irish authorities have confirmed that it is “a matter for each individual entity wishing to market Islamic finance products to have a Shari‘a Board available”, Department of Finance, Islamic Finance in Ireland; An Information Note, op. cit., 7.

  75. 75.

    Central Bank of Ireland, Address by Head of Markets Policy, Martin Moloney at the IFLC at the UCD School of Law, op. cit.

  76. 76.

    s110 TCA 1997 (Irl.), as amended by the Finance Act, 2003 (No. 3 of 2003) (Irl.). See also, Omer Khan and Ken Owens, “A greater understanding brings new opportunities” Islamic Finance Review, (2009/2010), 53, 53.

  77. 77.

    Irish Revenue Commissioners, Islamic Finance, Tax Briefing Issue 78, op. cit., 8.

  78. 78.

    Introduced by s58 Finance Act 2000 (No. 3 of 2000) (Irl.).

  79. 79.

    Chapter 1A Part 27 TCA 1997 (Irl.). Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit., [2.2.1].

  80. 80.

    Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit., [2.2.1].

  81. 81.

    The requirement for non-Irish resident investors to make a declaration of non-residence in order to avoid taxation of redemption payments from an Irish domiciled fund has been removed.

  82. 82.

    Irish Revenue Commissioners, Revenue Technical Guidelines, “Investment Undertakings, General Guidelines for Calculating Tax Due and for Completing Declaration Forms”, Part 27-01A-02, 6–7, see also, Dillon Eustace, Taxation of Collective Investment Funds and Availability of Treaty Benefits, 2010, 7, available at: www.dilloneustace.com/download/1/Taxation%20of%20Collective%20Investment%20Funds%20and%20Availability%20of%20Treaty%20Benefits.pdf (last accessed: February 22, 2019).

  83. 83.

    See, for example, the CIMB-Principal Islamic Asset Management (Ireland) Plc, Prospectus dated 7 September 2016, 59, which notes that “[unit holders] who are neither resident nor ordinarily resident in Ireland in respect of whom the appropriate declarations have been made … will not be subject to tax on any distributions from the Company or any gain arising on redemption, repurchase or transfer of their shares provided the shares are not held through a branch or agency in Ireland”. It also provides that “[n]o Irish stamp duty will be payable on the subscription, transfer or redemption of Shares provided that no application for Shares or re-purchase or redemption of Shares is satisfied by an in specie transfer of any Irish situated property”. Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit., [2.2.3].

  84. 84.

    Deloitte, Corporate Sukuk in Europe – Alternative financing for investment projects, (n.d.), 9, available at: https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/financial-services/me_Islamic-finance_corporate-sukuk-in-europe.pdf (last accessed: February 22, 2019).

  85. 85.

    Under the murābaḥa model, the financier buys the property and sells it immediately to the borrower for the original purchase price plus an agreed mark-up (the financier’s profit) to be paid in instalments.

  86. 86.

    Under the ijārah wa-iqtina model, the borrower undertakes to purchase the property at the end of the rental period with the purchase price spread out over the duration of the lease—the bank remains owner of the property for the lease term and the rent paid by the borrower represents the banks profit, H. A. Dar, “Islamic House Financing in the United Kingdom: Problems, Challenges and Prospects”, Review of Islamic Economics, 12 (2002), 47, 51.

  87. 87.

    Under the diminishing mushāraka model, the financier and the customer enter into a joint ownership of a property, the financier leases its share back to the borrower who also progressively purchases the financier’s equity in the property until the financiers share in the property is reduced to zero. Michael Ainley, Ali Mashayekhi, Robert Hicks, Arshadur Rahman, and Ali Ravalia, Islamic Finance in the UK: Regulation and Challenges, (London: Financial Services Authority, 2007), 20.

  88. 88.

    Consumer Credit Act 1995 (No. 24/1995) (CCA 1995) (Irl.).

  89. 89.

    Interpretation, CCA 1995, (Irl.) as amended by s 33 of, and Part 12 of Schedule 3 to, the Central Bank and Financial Services Authority of Ireland Act 2004 (No. 21 of 2004) (Irl.).

  90. 90.

    s2(1) CCA 1995 (Irl.), as substituted by s33 of, and Part 12 of Schedule 3 to, the Central Bank and Financial Services Authority of Ireland Act 2004 (Irl.).

  91. 91.

    Currently, Community Finance Ireland is developing a murābaḥa-based product to be used to finance the acquisition of properties by Muslim community groups or social enterprises, although not by individuals directly; see further, Philip Lee, “Ireland’s First Islamic Financing Product: The First Of Many”, 2018, available at: https://www.philiplee.ie/irelands-first-islamic-financing-product-the-first-of-many/ (last accessed: February 22, 2019).

  92. 92.

    Secretary of State for Work and Pensions v UP [2010] UKUT 262 (AAC), [13].

  93. 93.

    Financial Conduct Authority (previously the Financial Services Authority), Regulation of Home Reversion and Home Purchase Plans, (London: Financial Services Authority, 2006), 6.

  94. 94.

    MCOB 1.2.1 (1) noting that: “This sourcebook applies to every firm that: (a) carries on a home finance activity (subject to the business loan application provisions); or (b) communicates or approves a financial promotion of qualifying credit, of a home purchase plan or of a home reversion plan” (emphasis added).

  95. 95.

    MCOB 4.10 (advertising and selling standards), MCOB 5.8 (pre-application disclosure), MCOB 6.8 (Disclosure at the offer stage), MCOB 7.8 (Disclosure at start of contract and after sale), MCOB 11 (Responsible lending and responsible financing of home purchase plans), MCOB 12.7 (Charges), MCOB 13.8 (Arrears and repossessions).

  96. 96.

    Paragraph (a), definition of “credit transaction”, s267N TCA 1997 (Irl.), which provides as follows:

    1. (a)

      an arrangement whereby a finance undertaking acquires an asset for the purpose of disposing of the full interest in that asset to a borrower in circumstances where—

      1. (i)

        the consideration paid or payable by the borrower exceeds the consideration paid or payable by the finance undertaking for the asset,

      2. (ii)

        all or part of that consideration is not required to be paid until a date later than the date of the disposal, and

      3. (iii)

        the excess of the consideration paid or payable to the finance undertaking by the borrower in respect of the asset over the consideration paid or payable by the finance undertaking for the asset is equivalent to the return on a loan of money at interest.

  97. 97.

    Paragraph (c), definition of “credit transaction”, s267N TCA 1997 (Irl.), which provides as follows:

    1. (c)

      an arrangement whereby—

      1. (i)

        a finance undertaking and a borrower jointly acquire an asset or

      2. (ii)

        a finance undertaking acquires an interest in an asset from a borrower, in circumstances where the borrower retains an interest in that asset,

      on terms whereby—

    1. I.

      the borrower—

      1. A.

        in the circumstances referred to in subparagraph (i) has exclusive use of the asset immediately and, in the circumstances referred to in subparagraph (ii), retains exclusive use of the asset immediately, as the case may be,

      2. B.

        is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including any increase in the value of the asset), and

      3. C.

        agrees to make payments to the finance undertaking amounting to the aggregate of the consideration paid or payable by the finance undertaking for the acquisition of its interest in the asset and any consideration paid or payable by the borrower for the use of the asset during the period of the arrangement,

    2. II.

      the excess of the consideration (including any consideration paid or payable for the use of the asset during the period of the arrangement) accruing to the finance undertaking from the borrower in respect of the interest of the finance undertaking in the asset over the consideration paid or payable by the finance undertaking for the asset is equivalent to the return on a loan of money at interest, and

    3. III.

      the finance undertaking’s interest in the asset passes either immediately or by the end of a specified period of time, to the borrower for a consideration which exceeds the consideration paid by the finance undertaking for the asset.

  98. 98.

    While the Revenue’s Tax and Duty Manual (Part 08A-01-01) suggest that ijārah wa-iqtina structures would fall within the provisions of the Finance Act 2010, it acknowledges that the provisions do “not apply to a lease of immovable property” (Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit., [3.3.1.3], emphasis added).

  99. 99.

    s267O(1) TCA 1997 (Irl.).

  100. 100.

    This is relevant for the purposes of relief on capital expenditure and capital gains tax.

  101. 101.

    HM Land Registry, Practice guide 69: Islamic financing, 2015, https://www.gov.uk/government/publications/islamic-financing/practice-guide-69-islamic-financing (last accessed: February 22, 2019).

  102. 102.

    Fahim Uz-Zaman, Shariah-Compliant Financial Services: A Guide to Products, Markets and Trends, (London: VRL KnowledgeBank Ltd., 2006), 37; Reinhard Leopold Klarmann, Islamic Project Finance; a Legal Study with Particular Reference to the Laws of Switzerland and the United Arab Emirates, (Zurich: Schulthess, 2003), 252.

  103. 103.

    The Irish Revenue Commissioners’s Tax and Duty Manual, while referring to the stamp duty issue, reiterates that “stamp duty will arise under normal rules”. Irish Revenue Commissioners, “Tax Treatment of Islamic Financial Transactions”, Tax and Duty Manual (Part 08A-01-01), op. cit. [6.3.8].

  104. 104.

    s73 Finance Act 2003 (UK).

  105. 105.

    s71A Finance Act 2003 (UK), inserted by the Finance Act 2005, s94, Schedule 8 [1]–[2].

  106. 106.

    Cosgrave, Barry, “United Kingdom” in The Islamic Finance and Markets Law Review, Andrew M Metcalf and Michael Rainey (eds.), (London: Law Business Research, 2016), 68, 73.

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    Edana Richardson

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Richardson, E. (2019). Islamic Finance Under Irish Law. In: Hajjar, M. (eds) Islamic Finance in Europe. Palgrave Studies in Islamic Banking, Finance, and Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-04094-9_7

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  • DOI: https://doi.org/10.1007/978-3-030-04094-9_7

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-04093-2

  • Online ISBN: 978-3-030-04094-9

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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