24Feb

Russia Considers Access to Islamic Banking Markets

24 February 2016 Acumum Legal & Advisory 26

A draft law on Islamic banking has been submitted to the State Duma in Russia concerning the establishment of new bank accounts allowing investment into only Shariah-approved assets.

The idea was first raised at the level of the State Duma a year ago after Western sanctions closed Russia’s access to the European and American capital markets. Linar Yakupov, President of the Foundation for the Development of Islamic Business and Finance stated that to associate Islamic finance with political or religious ideas would be to misunderstand the concept of it, as it is only a set of financial instruments largely unrelated to Islam itself.

A draft law was submitted to the State Duma in January. Under this law, banks could set up accounts with funds that could be invested only in line with an investment declaration, thus adapting the Russian banking system to the requirements of religious financial institutions. Individuals and organisations would need to be assured that their funds are invested in accordance with Shariah law, therefore outlawing use of the funds in industries such as alcohol and gambling.

Yakupov has advised that a better alternative for Russia would be to set up dedicated ‘windows’ in existing large banks to provide Islamic banking services, rather than setting up independent Islamic banks. This route has been taken by world-leading banks such as HSBC and Citibank, and would go some way to reducing competition between ‘ordinary’ and Islamic institutions.

07Nov

RUSSIA – MALTA TAX TREATY

7 November 2015 Acumum Legal & Advisory 10

Malta-Russia Tax Treaty

It is expected that the new tax treaty will be in force much quicker then its predecessor.

Following the Cyprus crises, Malta has remained a tax compliant and tax efficient jurisdiction for legitimate businesses.

Fitch has recently confirmed that Malta’s banking system is stable: Fitch Report: Malta Bank’s Stable – with the World Economic Forum stating that Malta is 13th in respect of sound banking systems – globally.

Added to which, French President Francois Hollande’s has recently endorsed the legitimacy and integrity of Malta’s banking sector, stating that Malta is ‘not a tax haven’ – but a legitimate low tax EU jurisdiction.

The terms of the Russian – Malta tax treaty allows for the following benefits:

5% for interest and royalties
5 to 10% on dividends
Business profits to be taxed at normal state tax

Malta, unlike the other contenders, provides unique tax benefits, which international groups with interests in Russia will be able to fully explore when the treaty becomes law in both countries.

Namely:

Malta allows for an effective 5% rate of corporation tax on business income
Companies, which are resident but not domiciled in Malta are taxed on the remittance basis of taxation

The Malta-Russia tax treaty provides generous exemptions for royalties and a quasi-full exemption from tax on foreign dividends. The absence of CFCs, little TP regulation and access to the EU tax directives also help. These combined factors make Malta an ideal jurisdiction to locate a group holding company, as well as a financing or an IPR holding SPV.

More importantly, Malta allows for the continuation of non-Maltese companies, for example a BVI holding entity subject to various restrictions can easily re-domicile (migrate) to Malta without losing its corporate personality.

Notably, on becoming Malta-resident the company can achieve a tax-free step-up in the base cost of its assets effectively avoiding tax on future disposals.

To see the text of the Russia – Malta Tax Treaty please go here.

russia

Russia Considers Access to Islamic Banking Markets

RUSSIA – MALTA TAX TREATY

Malta-Russia Tax Treaty

It is expected that the new tax treaty will be in force much quicker then its predecessor.