Corporate Tax & International Tax
The Corporate Tax &
International Teams are
Luxembourg Tax Alert.
dedicated teams of
highly skilled tax 24 June 2010
compliance services in Islamic Finance: Guidance on real estate
the area of corporate
and international tax. transactions
We can provide all
services in this respect
and also perform a wide
range of other services, The Indirect Tax Authorities issued a circular on 17 June 2010 that covers some
in particular for
business operating in transfer tax issues related to Murabaha and Ijara agreements. The circular provides
international for an extension of the existing tax incentives in the field of transfer taxes and VAT to
locally. Murabaha and Ijarah operations. The main features of the circular are as follows.
If you need further “Substance over form approach”
refer to your usual
The circular provides for the definition of the above mentioned contracts taking into
person or contact: consideration the substance of each agreement.
+352 451 452 578 • Murabaha which is assimilated to a cost plus profit agreement.
• Ijarah which is assimilated to a leasing agreement.
If you no longer wish to
receive this newsletter, Such Sharia’a compliant contracts require intermediary structures to be interposed
please let us know by such as Special Purpose Vehicle (SPV).
Transfer taxes treatment
Sale of shares in an entity owning real estate
As a rule, no transfer taxes will be levied on the sale of shares of a Luxembourg real
estate rich company. On the other hand, sale of shares of partnerships or economic
interest groupings, owning Luxembourg real estate, will trigger a 6% transfer tax . In
case the operator (SPV) disclosed in the deed that the purpose of the transaction is to
buy the property in order to resell it, such rate will be increased to 7.2%. However,
only 1.2% tax will be levied on such purchasing deed provided that resale deed
registration will be concomitant.
Taxable basis for transfer taxes
The circular clarifies also the tax treatment applicable to the predetermined mark-up
Administration de l’Enregistrement et des Domaines.
Law of 21 December 2001, article 9, 1°.