But Shariah-compliant financial products can differ greatly from conventional financial products. Where tax is concerned, these products pose unique and complex challenges—in part because Canada’s tax law does not accommodate these products and the tax authorities lack the requisite knowledge.
As the KPMG discussion paper The Taxation Treatment of Islamic Finance in Canada points out, financial institutions and others seeking to offer these products must meet these challenges to succeed. Further, Canada’s policy makers need to address the taxation of Shariah-compliant products and services so Canadian financial service providers can take advantage of the opportunities and attract investment, much like other western jurisdictions (e.g. France, Australia, Ireland, the United Kingdom) are doing.
Written by KPMG’s team of Tax and Financial Services professionals, this discussion paper features:
- an overview of Shariah principles and Islamic finance products
- a survey of measures taken by other western jurisdictions to deal with the tax implications of these products
- an analysis of the income and commodity tax challenges presented by Islamic finance products, along with discussion of some potential solutions.